New Delhi: An auction for radio spectrum on the 800MHz wave length fetched the government some Rs.3,500 crore after three rounds of bidding, but was barely a tenth of what it had hoped to raise.
Sistema Shyam Teleservices Ltd was the only bidder and won the frequencies in eight telecom service areas, according to two officials of the department of telecommunications (DoT), who spoke on condition of anonymity.
“The process had to be followed” even if there was just one bidder, one of the officials said. Sistema Shyam won permits to use the spectrum at the minimum price because there was no competition.
The total value of the air waves it won is Rs.3,639 crore. The eight circles include Delhi, Kolkata, Gujarat, Karnataka, Tamil Nadu, Kerala, western Uttar Pradesh and West Bengal. The company already has operations in Rajasthan.
Radio spectrum on 800MHz is used in India by telecom operators to offer voice and data services through the code division multiple access, or CDMA technology platform.
The government, however, is unlikely to see any of the money coming in till 2016, as the operator will be allowed to offset its dues against the money paid in January 2008. Of the Rs.3,639 crore to be paid, Sistema Shyam has earlier paid Rs.1,626 crore. It therefore owes the remaining Rs.2,013 crore to the government, which will only be due from March 2016 as the government has provided telecom operators a moratorium period of three years. After March 2016, Sistema Shyam will be allowed to pay in 10 equated yearly instalments of around Rs.200 crore.
The lower-than-expected revenue will further put pressure on the fiscal position of the government, which has set a target of containing the fiscal gap to 4.8% of gross domestic product in the year to March 2014. To meet this target, it expects Rs.40,000 crore from the telecom sector, of which half is expected from the auction of radio spectrum in 2013-14.
There would be more auctions in the next 12 months, according to DoT secretary R. Chandrashekhar.
The government had set a minimum price of Rs.9,100 crore for the auction of 5MHz of CDMA spectrum across the country, half that of the bench price set before an auction in November.
The reserve price for spectrum on the 900MHz wave length was Rs.23,752 crore and Rs.11,876 crore for 1800MHz, for 5MHz pan-India. There were no bidders for these frequencies that offer wireless services on the global system for mobile communications, or GSM platform.
Sistema Shyam had applied for spectrum in 11 circles but bid for eight, which means the company will shut operations in Mumbai, Maharashtra and eastern Uttar Pradesh, the DoT officials cited earlier said.
In a statement, the telecom operator said it will focus on a data-centric, voice-enabled strategy and its auction strategy was based on a number of factors including pricing, number of slots available, competition, and data potential in the areas.
Sistema Shyam has won three slots of 1.25 MHz of CDMA spectrum—3.75MHz in total—in each circle, and expects its operations in nine circles to cover 40% of India’s population, 60% of data potential and safeguard 75% of its current revenue, according to the company.
It was one of nine companies affected by the 2 February, 2012, Supreme Court judgment that cancelled 122 telecom permits and spectrum allocated in January 2008.
The company has started procedures to stop operations in Mumbai, Maharashtra and eastern Uttar Pradesh, where it did not bid. This will impact another 1.5 million subscribers and some 15%, or 400, of its employees.
“Full efforts are being made to absorb maximum number of employees in other circles,” the firm said in a statement. “In addition, care is being taken to place some of the employees in other companies.”
Earlier this week, Sistema Shyam had announced that it was closing operations in 10 circles, affecting around 2.2 million of its 12 million subscribers. The government has also allowed operators to pay 25% of the winning bid amount upfront and the remaining after a two-year moratorium in equated yearly instalments. This means the government is unlikely to get any money from the auction for the next few years.
Sistema Shyam is a joint venture between Shyam Group that holds around 26% equity, with the rest held by Russian conglomerate Sistema JSFC and the Russian government. The company, which runs the MTS brand of mobile telephony services, has so far invested over $3.2 billion in the India telecom sector, the company said.