The next round of spectrum auction is expected to be a three way fight between Airtel, Vodafone and Reliance Jio.
The three companies have deposited higher earnest money compared to others in the fray indicating that they have plans to bid for pan-India spectrum in both 1800 MHZ and 900 MHZ band.
Under the auction rules, operators are required to submit bank guarantees specified for each circle they intend to bid.
For example, if an operator wants to bid for 5MHz spectrum in the 900 MHz band in the Delhi circle it has to submit Rs 172.5 crore along with the application. Earnest money for the 1800 MHz band in the same circle has been fixed at Rs 36.25 crore. By this formula, if an operator wants to bid for 5 MHz spectrum pan-India in the1800 MHz band, it will have to pay Rs 1,906 crore in the form of bank guarantees. Earnest money for the same amount of airwaves in the 900 MHz band in Delhi, Mumbai and Kolkata is Rs 438 crore.
Therefore, the earnest money deposited by the three players clearly indicate that they plan to bid for more than 5MHz in some circles. Others in the fray including Reliance Communications, Tata Teleservices, Telewings and Aircel have deposited less than Rs 500 crore each indicating that their strategy would be to acquire only incremental spectrum in some areas.
Going by the initial deposit made by the operators, the Government will meet its targeted revenues of Rs 11,000 crore.
But some of the players can still withdraw their applications.
The Department of Telecom has allowed the companies to pull out before January 27.
20% premium “We expect the spectrum auctions to happen at a 20 per cent premium to the reserve price, and if the entire spectrum available for auction is sold, we estimate that the government could raise Rs 57,000 crore.
“However, with the option of deferred payment, we think that the government could raise Rs 20,000 crore upfront from the auction,” said a Morgan Stanley research report.