M A I N   N E W S

High reserve price keeps telcos away from 2G bidding
Girja Shankar Kaura/TNS

New Delhi, November 12
As expected, the 2G Spectrum auction, which got underway today, has received a lukewarm response from telcos. There were no takers for Delhi and Mumbai circles, leaving the government wondering whether it would be able to achieve the revenue target set by it.

At the end of the day’s bidding, which saw five rounds, about 45 per cent of the total 2G Spectrum put up for sale by the government remained unsold, strengthening the industry’s argument that the reserve price was too high to spur active participation by telecom operators.

Telcom Secretary R Chandrashekhar confirmed that at the end of the fifth round of bidding, the government had received bids amounting to just Rs 9,200 crore, which was less than a quarter of the Rs 40,000 crore the government had targeted.

In contrast, the government in 2010 earned Rs 1.06 lakh crore by auctioning permits for 3G airwaves and broadband wireless access.

The fifth round garnered bids for 98 blocks of the 2G Spectrum in 18 designated telecom areas while airwaves in major areas like Delhi, Mumbai, Karnataka and Rajasthan found no takers. Incidentally, Delhi and Mumbai constitute 40 per cent of the base price.

In 176 blocks of Spectrum that were put on auction, bids were received only for 98, Chandrashekhar said. Out of 22 circles, the demand for Spectrum crossed the offer only in UP (West) and UP (East).

“The Spectrum reserve price exceeded in UP (W) and UP (E) circles,” the Telecom Secretary said. In fact, the auction has gone to sixth round due to excess demand in these two circles.

Gujarat and Bihar received bids for all eight blocks (of 1.25 MhZ each). In rest of the circles, the demand was less than the eight blocks that were put for auction.

Only five companies, Bharti Airrtel, Vodafone, Idea Cellular, Videocon and Telenor, are participating in GSM auction. None of them is bidding for pan-India airwaves.

Companies bid for six blocks (of 1.25 MHz each) in MP, North-East, West Bengal and Haryana, while five blocks attracted bids in Maharashtra. Experts are of the view that lack of interest in the auction can lead to further confusion in the telecom sector.

The government will have to deal with multiple issues that this auction has thrown up, including how to determine the price to charge the one-time fee for excess Spectrum in circles like Delhi, Mumbai, Karnataka, which was approved earlier.

The government had planned to use the market-discovered price from 2G auctions to charge incumbent telcos for the excess Spectrum they hold. Now that there is no market-discovered price, what does the government do?

VITAL STATS

Targeted revenue

Rs 40,000 cr

Bids received

Rs 9,200 cr

Total blocks on auction

176

Bids received for

98