3G auctions ring up Rs 67,719cr for govt

Double The Budget Estimate Of Rs 36,000cr

Shalini Singh | TNN

New Delhi: After tremendous hype, hoopla, 34 days and 183 rounds of aggressive bidding by nine players, the 3G auctions drew to a close on Wednesday after raking in a whopping Rs 67,719 crore for the government. The 3G bounty is almost double the original revenue estimates of Rs 30,000 crore by telecom minister A Raja and more recently, Rs 36,000 crore by finance minister Pranab Mukherjee in the Union Budget for 2010-11. Effectively, this translates to Rs 16,750.6 crore for a single pan-India slot of 3G spectrum. The government auctioned three pan-India 3G slots with additional spectrum in Punjab, West Bengal, Himachal Pradesh, Bihar and Jammu & Kashmir. BSNL & MTNL were already allocated 3G spectrum a year ago. They did not bid, but will now have to pay the 3G auction price for their spectrum holding. Vodafone, Bharti and Reliance bagged the plum Delhi and Mumbai circles for a whopping Rs 3,316.9 crore and Rs 3,247.1 crore respectively. Bharti, Reliance and Aircel won 13 circles each, Idea 11, and Vodafone and the Tatas 9 circles each. S Tel got three circles while Etisalat and Videocon failed to win even one. Spectrum will be allocated to operators in September and it is likely 3G services will be rolled out by Diwali. So by Diwali, cash from 3G and the ensuing broadband auctions should be flowing into government coffers. The consumer also gets to be king, with additional choice and superior voice quality. 3G services, for the most part, will be used for voice, as is the case with 2G spectrum. They will also be used substantially for delivering SMSes. It is in large cities mostly metros like Delhi and Mumbai that 3G is expected to first deliver advanced services, multimedia, videos and other hi-tech offerings whose biggest consumers are expected to be from the business community and educated youth. It is expected that India will see a real spurt in infotainment and Bollywood content on the back of 3G rollout and in services like ehealth, e-education and mobile banking. However, this requires creation of capability both on the access side as well as the content side to get India anywhere close to the real potential of what 3G can deliver. Eventually, 3G could form the basis of a major broadband revolution which could spread to the rural heartland.
Twin bonanza to prune deficit

Its a double benefit for the government. On the earnings side, its likely to mop up almost Rs 80,000 crore from spectrum it has already garnered Rs 67,719 crore from the 3G auction while it is likely to get an additional Rs 12,000 crore from the broadband wireless access (BWA) auction against a projection of just Rs 36,000 crore in the Union Budget. At the same time, crude prices too have fallen below $69 per barrel, which will translate into a significant drop in expenditure. At $85 a barrel, under-recoveries by oil marketing companies would amount to Rs 100,000 crore. But if crude prices remain at the current level for the rest of the year, under-recoveries would fall to around Rs 30,000 crore. The two developments could together push down the fiscal deficit from the projected 5.5% to below 5%. P 27

Spectrum uncertainty drove up bidding prices

Shalini Singh | TNN

New Delhi: The 3G auctions have beaten all revenue projections by analysts, government and private operators, with government coffers expected to surge within the next 10 days as bidders deposit their money. What drove 3G prices to this level almost double of what was expected? The simple answer is uncertainty about future spectrum availability and an artificial shortage that was created in 2008 when telecom minister A Raja allocated spectrum to 120 companies at 2001 prices. In 2008, Raja allocated about 528 MHz of spectrum (4.4 MHz x 120 licences) at roughly Rs 9,000 crore on a first-come-first-served basis. It is well known that the real price through an auction for this spectrum should be at least 6 times or closer to Rs 50,000 crore. The government then decided to auction 355 MHz of 3G spectrum through an open, multistage bidding process (5 MHz x 71 licenses). This has fetched Rs 16,750.58 crore for a panIndia 3G slot vis--vis Rs 1,651 for a pan-India 2G licence. Essentially what happened is that a total of roughly 580 MHz of total 2G plus 3G spectrum

was available at the beginning of 2008. Of this, the government allocated 2G spectrum at throwaway prices, enabling the winners to hold private auctions. Since the total amount of spectrum in the system declined sharply and no information was available to bidders on when the next round of spectrum would be available, it drove up 3G prices almost to a point of panic. Confirming this, Bharti Airtel which bagged 13 circles including the lucrative Delhi and Mumbai circles, said, "we would like to point out that the auction format and severe spectrum shortage along with ensuing policy uncertainty, drove prices beyond reasonable levels. As a result, we could not achieve our objective of pan-India 3G footprint in this round". On an average, Indian operators hold 5.7 MHz of spectrum though Bharti and Vodafone have a larger spectrum holding. The winners of the 3G pan-India bid will now move to an average of 11 MHz per circle, which is closer to the international average of 18 MHz. So essentially driven by an artificial shortage and rock bottom spectrum prices in 2008, the 3G auctions have seen a much higher bid. It remains uncertain when the next lot of 3G spectrum will be available for auction. Under the current rules, if it is released within a year, then the current 3G price will be the benchmark but if it is beyond a year then fresh auctions will have to be held.

Use of radio waves is controlled by govts

Total Range Of Radio Waves Lies Between 3 Hertz And 300 Gigahertz

What is spectrum? Energy travels in the form of waves, called electromagnetic waves.

These waves travel at the speed of light and carry different amounts of energy. Higher energy means the wave has a higher frequency, that is, more vibrations per second. We classify different energy-carrying waves by different names. Thus, (in order of increasing energy or frequency): radio waves, microwaves, infrared radiation, visible light, ultraviolet radiation, x-rays and gamma rays. All are waves, but with different energies and frequencies. This whole range is called the spectrum. Different types of waves are usually classified by frequency ranges or bands. The unit of measurement for frequency is hertz. One hertz is one vibration or oscillation of the wave per second. How is this spectrum used? Humans have evolved to directly sense only one kind of electromagnetic waves visible light. This is just a small range (a band) of frequencies within the spectrum. But science has harnessed various other segments of the spectrum for different uses. One of the most important of these is the modern wireless communication system. It involves converting sound or electrical energy into electromagnetic waves and sending them out (by a suitable transmitter), to be caught by another instrument (a receiver) and converted back to sound or visual images. For all this, only a specific range of waves can be used called radio waves. Waves with higher frequency than radio waves interfere with the hardware while those with lower frequencies cannot carry the same amount of information. Within radio waves there are again different categories ultrahigh frequency (UHF), very high frequency (VHF), etc. The total range of radio waves lies between 3 hertz to 300 gigahertz (billion hertz). Other waves in the spectrum like infrared or gamma rays can be detected and are useful in figuring out the identity of chemical elements and their physical properties. How come the government is selling spectrum? By law, use of radio waves to communicate is strictly controlled by governments, and globally coordinated by the International Telecom Union. This originated because of the need for governments to retain some frequencies for exclusive use in, say, defence or law enforcement communication. If everybody started transmitting and receiving signals in every frequency then anybody could tune into police conversations or military communications. The radio waves part of the spectrum was parcelled out for public use in radios, wireless telephony, etc, and some frequencies were reserved for government use. With the rise of mobile or cellular telephony, the need arose for more and more frequency bands to be used to transmit messages. So, governments in most countries started selling the right to use a specific frequency range to telecom companies. The recent auction for 3G by the government of India was a case in point. Once the companies acquire the right to use a frequency band they make it available for use in providing telephonic and other services to the citizens, and charge fees for the service.