May 3: Prices of 3G spectrum contnue to edge upwards. On Monday, the price of spectrum for Mumbai and Delhi circles went past Rs 1,650 crore. This is the price at which the telecom ministry had awarded 2G spectrum for all of India in 2008. Price for pan-India spectrum also crossed the Rs 10,000 crore
mark on Monday. By the end of 20th day of 3G bidding, the price of Mumbai circle had reached Rs 1,706 crore and Delhi circle Rs 1,653 crore. The government hopes to raise over Rs 50,000 crore via auction of this spectrum.
The rising auction price of 3G spectrum has raised the issue of whether the 2G spectrum sale of 2008 gave some players a scarce resource cheap. Some of these new allottees had then raised money from foreign players. They were able to get several times the price they had paid even though they had no investments to show.
The price of pan-India 3G spectrum by the end of 20th day of auctions reached Rs 10,347.67 crore. This is nearly three times the reserve price of Rs 3,500 crore, at which the auction had started. It ensures that the government will get atleast Rs 41,766 crore in revenue from the 3G auction. The 3G auction will continue till such time that demand equals supply.
Earlier, the government has set a target to raise Rs 35,000 crore from the auction of both 3G and broadband wireless. But that target has been revised upwards continuously. Now the government hopes to raise Rs 55,000 crore from the auction of both 3G and wireless broadband spectrum. The auction of wireless broadband will start after the completion of 3G spectrum. For wireless broadband spectrum, there are 11 players for two blocks of spectrum.
However, HSBC in a report said that the final collection for the government may be less as there is a possibility that it may not find takers for all slots available in some circles.
The way the 3G auction is going, the brokerage houses are concerned that it will put a burden on the balance sheet of the telecom players. All the major telecom companies have already seen their revenues taking a hit in 2009 due to increased competition.