2G auction revenues way below estimate; Delhi, Mumbai get no bids
2G auction for the sale of 1800MHz spectrum turned out to be a lackluster affair as govt garnered ~Rs94bn, about 67% of the reserve price for 5MHz pan India spectrum; the auction ended after 14 rounds of bidding in 18 circles. The most expensive circles of Delhi and Mumbai along with Karnataka and Rajasthan received no bids which impacted the overall collections as the 2 metro circles accounted for ~40% of the pan India reserve price of 5MHz spectrum.
Idea wins in 8 circles while Telenor focuses on populous circles
Idea won back spectrum in all the seven circles it had lost due to cancellation of licenses in February 2012 and added a block of 1.25MHz in Bihar at a total cost of Rs20.3bn. Vodafone won 2 blocks in 9 circles and 1 block in another 5 circles taking its tally to 14 circles for ~Rs11.3bn. Telenor netted 4 blocks in 6 most populous category A & B circles + Bihar at a cost of ~Rs40bn, the highest cumulative amount paid amongst the 5 competing operators. Videocon won 4 blocks of spectrum in 6 circles each for Rs22.2bn. Barring Bihar, none of the circle level bids exceeded the reserve price set for that circle while bids were received for 102 blocks out of a total of 176 on offer. The poor response to 2G auction implies renewal fees and one time excess charges would be benchmarked to the reserve price of most of the circles which would likely result in lower outgo for incumbents. Retain our BUY on Bharti and Idea.
Circle winners and payouts
|Company||Circles won||Total cost (Rs mn)|
|Telewings Comms (Telenor)||AP (4), Bihar (4), Gujarat (4), Maharashtra (4), UP(E) (4), UP(W) (4)||40,183|
|Bharti Airtel||Assam (1)||87|
|Idea Cellular||Assam (4). Bihar (1), J&K (4), Kolkata (4), NE (4), Orissa (4), TN (4), WB (5)||20,313|
|Vodafone||Assam (2), Bihar (2), Haryana (2), HP (1), J&K (2), Kerala (1), MP (2), Maharashtra (1), NE (2), Orissa (2), Punjab (1), UP(E) (1), UP(W) (2), WB (2)||11,279|
|Videocon||Bihar (4), Gujarat (4), Haryana (4), MP (4), UP(E) (4), UP(W) (4)||22,214|
Note: figures in bracket show blocks of 1.25MHz won
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