New Delhi: The government may hold fresh auction for the unsold 2G airwaves by March after the sale this week failed to attract sufficient bids from telecom operators, communications minister Kapil Sibal said on Friday.
Sibal blamed the poor response from phone companies on the negative environment generated by the Comptroller and Auditor General’s (CAG) report that the government had, by allocating spectrum instead of auctioning it in 2008, caused notional losses that the state auditor estimated at as much as Rs.1.76 trillion.
“This is something that we will discuss at the eGoM (empowered group of ministers) and we intend to hold auctions before the 31st of March,” said Sibal at a media briefing. Finance minister P. Chidambaram, who is chairman of the eGoM, and information and broadcasting minister Manish Tewari were also present at the briefing.
On Wednesday, Sibal had defended the government, saying the auction was bound by court directives and would have received more attractive bids if it had a free hand in policymaking.
Sibal’s remarks came after the auction ended by raising less than one-third of the Rs.30,000 crore it had been expected to garner. Only 42% of the total spectrum available was sold, with no takers for airwaves in Delhi and Mumbai, India’s biggest telecom markets. Telecom analysts blamed the disappointing response partly on the high base price set by the government.
The government’s original estimate of Rs.40,000 crore had to be pared to Rs.30,000 crore, after applicants for the CDMA spectrum (800 megahertz or MHz band) auction chose not to participate in the auction on grounds that it was not financially viable. CDMA stands for code division multiple access, a telecom technology platform competing with the more popular GSM, or global system for mobile communications.
The sale was necessitated by the 2 February Supreme Court decision to cancel the 122 permits allocated to nine companies that were given 2G spectrum and licences to operate in 22 telecom circles, or zones, on grounds that the process of allotment on a first-come-first-served basis was flawed.
“What I’ve been trying to say is that the Rs.1.76 trillion scam was a myth,” said Chidambaram. “There was a good story in telecom. Yes, mistakes may have been made by which the story got derailed, but we could’ve easily put it back on the rails after correcting the mistakes in the implementation. But the point is that policymaking must be left to the government of the day.”
Chidambaram said that the low prices realized at the auction didn’t mean that the government would miss its forecasts, and that the proceeds from the sale of CDMA spectrum and one-time fees to be paid by existing operators would contribute towards reducing the fiscal deficit.
“The government was expecting revenues from the auction to help contain the fiscal deficit to 5.3% (of gross domestic product) this year and the low prices mean that this wasn’t going to be possible,” said D.K. Joshi, chief economist at rating agency Crisil Ltd.
The auction, which ended on Wednesday, saw the government receiving bids worth Rs.9,407 crore for 1800MHz spectrum in 18 out of the 22 telecom areas that were on offer, after 14 rounds of bidding.
Other analysts said the poor price realization had been expected.
“The results of the spectrum auctions are not too surprising, especially looking at the current economic climate, poor investor sentiment, significant existing debt burdens on the telcos and low relevance of 2G 1800MHz spectrum in the country when we are talking about a shift from voice to data,” said Abhishek Chauhan, a senior consultant of the information communications technology practice at Frost and Sullivan. “Things might have turned out different if simultaneous auction of 900MHz and 1800MHz would have been conducted. This might hit the auctions and the reserve price of 900MHz spectrum as well.”
The government hopes to auction spectrum in the 900MHz band by May next year, 18 months prior to the renewal date for telecom licences in the metros.
The auction, in which only five of India’s 10 operators participated, earned a little more than the Rs.9,000 crore that the government received as entry fees under the allocation procedure followed in January 2008 by then communications minister A. Raja.
Asit Ranjan Mishra contributed to this story.