2G auction leaves a hole in govt's collection goal

Last Updated: Wed, Nov 14, 2012 21:20 hrs

The much awaited 1,800-MHz 2G spectrum auction ended on the second day on Wednesday, with the government managing to rake in a dismal Rs 9,407 crore.

At the end of the 14th round of bidding, the final revenue collected by the government went up by less than two per cent from the first day of bidding as only 101 blocks of 1.25-MHz spectrum could be sold.

While Telenor and Videocon got spectrum in six circles, Idea won in seven and Bharti got it only in the Assam circle. Vodafone won two blocks each in nine circles and one block each in five circles, making its presence felt in 14 circles.

Based on these numbers, only 20 per cent of the total value of the spectrum (GSM and CDMA) at a base price of Rs 48,000 crore was sold. The low percentage was largely because there were no takers in the three big circles of Delhi, Mumbai and Karnataka, which accounted for over 48 per cent of the total base price, and a CDMA auction could not take place owing to no interest among operators. If the government had not put the Delhi, Mumbai and Karnataka circles up for auction, its total earnings would have been 67.92 per cent of the reserve price for the 18 circles being auctioned.

Speaking after the auction, Communications Minister Kapil Sibal said, “The government did not have a free hand in deciding the pricing and we should follow the market dynamic.” He said the government might consider a fresh auction of the unsold blocks within the financial year and also the 800-MHz CDMA.

It is clear the government’s ambitious target to get Rs 30,000 crore from the auction and one-time spectrum fee will go awry. For one, with the operators having to pay only one-third of the spectrum price upfront, they will need to fork out about Rs 2,820 crore this financial year. The amount could be even lower as the government, under the auction terms, had agreed to adjust the 2G licence fee paid by operators whose licences had been cancelled by a Supreme Court order with what they would pay in the auction, provided they did not have any criminal charges. Based on this clause, the government might have to adjust Rs 4,000 crore of licence fee paid by Telewings (earlier Uninor), Videocon and Idea Cellular (in seven circles).

Together with the one-time fee (of which Rs 11,000 crore by MTNL and BSNL has to be funded by the government), the government will not be able to get more than Rs 8,000 crore this financial year, nearly a third of the target.

Rajan Mathews, director general of GSM operators' body COAI, said, “An artificially high reserve price that bore no congruence to market realities was the key reason for the auction failure.”

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