3G auction update

The bids for third-generation (3G) spectrum in prime circles are close to ‘irrational’ levels after 13 days of auctions, analysts tracking the sale process said. The cost of a pan-India 3G licence is nearing Rs 8,000 crore, but this price is largely driven by a handful of circles. For instance, bids for Delhi and Mumbai have crossed the Rs 1,000 crore mark, up over 300% from the base price, while other regions like Maharashtra and Tamil Nadu are inching towards the mark. Bids are surpassing ‘rational levels’, Citigroup analysts said in report last week when the cost of a pan-India 3G licence crossed $1.3 billion. Since then, the bid price has shot up another $500 million to close the week at $1.8 billion. On the other hand, nearly half the country has seen almost no demand for 3G airwaves, which allow telecom companies to offer faster data and internet services on mobiles. Analysts also said the aggressive bidding in the top circles has reached a stage where smaller operators will feel the strain on their balance sheets.