BackPanel backs 30% cut in 2G floor price of unsold waves
There were no takers for 1800MHz spectrum in four key zones, including Delhi, Mumbai
Premium(Mint)
New Delhi: A ministerial panel on Friday decided to recommend a 30% cut in the floor price of second-generation (2G) spectrum to be sold in telecom zones that attracted no bids at an auction last month that raised less than a third of the government’s target of ₹ 30,000 crore.
The so-called empowered group of ministers (eGoM) headed by finance minister P. Chidambaram decided to make the recommendation to the cabinet after a meeting on Friday.
“The cabinet will take a final call on the spectrum pricing issue," a senior department of telecommunications (DoT) official said, requesting anonymity.
There were no takers in the November auction for 1800 megahertz (MHz) radiowaves on offer in the key telecom zones, or circles, of Delhi and Mumbai—the nation’s biggest telecom markets—and Karnataka and Rajasthan.
The auction ended after a little more than two days of bidding on 14 November and raised ₹ 9,407 crore, against expectations of ₹ 30,000 crore, and was labelled a failure by many analysts who said the reserve price was too high. Only 101 of the 144 slots of spectrum on sale received any bids.
Reserve prices in the November auction were set at ₹ 693.06 crore in Delhi, ₹ 678.45 crore in Mumbai, ₹ 330.12 crore in Karnataka, and ₹ 67.08 crore in Rajasthan.
One analyst said a cut of 30% in the reserve price was not adequate.
“The move is in the right direction, but 30% is not enough," said a senior Mumbai-based telecom analyst with a multinational brokerage firm. “Much more needs to be done as the whole idea of even having a high reserve price for an auction to discover market price makes no sense."
At Friday’s meeting, the eGoM also decided that a fresh auction of spectrum in these four telecom circles will be completed before the 31 March end of the current fiscal year.
The auction of spectrum in the 900MHz band in Delhi, Mumbai and Kolkata will also take place simultaneously with the sale in the four 1800MHz circles.
This 900MHz spectrum is currently held by incumbent operators including Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd. Their licences in these circles will come up for renewal by November 2014, at which time they will have to pay for spectrum at market price, to be discovered via the auction.
The unsold spectrum in partially bid-for circles will not be part of the new auction. This spectrum will be available for any operator to buy at the price discovered in the zone that received bids. The DoT official said the market-discovered price would be valid for one year.
DoT will not ask for fresh recommendations on the telecom spectrum from the Telecom Regulatory Authority of India (Trai), but will refer some issues regarding the auction of FM radio spectrum to the regulator, the official added.
The spectrum auction was held as a consequence of the 2 February Supreme Court verdict that cancelled 122 telecom licences and spectrum awarded to nine companies on the grounds that the “first-come-first-served" allocation procedure followed in 2008 had been faulty.
On the issue of spectrum in the 800MHz band, the eGoM decided to defer all decisions to its next meeting in January 2013. The price of the spectrum in this band will be likely be lower than that for the 1800MHz band. Trai had earlier recommended that the 800MHz band spectrum be priced at 1.3 times the price discovered for the 1800MHz band.
“As evidenced in earlier auction, there were no new takers, so there are still old takers whose licences have been cancelled or who require additional spectrum to support the growing subscriber base. But because the reserve price was too high, even 30% reduction in it in these circles (Delhi, Mumbai, Karnataka, Rajasthan) is unlikely to motivate the incumbents to bid for these circles aggressively," said Hemant Joshi, partner, Deloitte Haskins and Sells. “However, there might be some slots, if any, taken by incumbents as they might be in need of additional spectrum to decongest their networks."
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