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EGoM cuts 2G spectrum auction base price 30%

Source : BUSINESS_STANDARD
Last Updated: Fri, Dec 07, 2012 21:01 hrs

pThe empowered group of ministers EGoM on telecom today decided to cut the 1800-MHz band spectrum auction reserve price by 30 per cent for four circles that did not attract bidders in NovemberppThe ministerial panel headed by Finance Minister P Chidambaram also decided that the spectrum under the 900-MHz band would be auctioned in the Delhi Mumbai and Kolkata circles Both auctions would be held simultaneouslyppTelecommunications Minister Kapil Sibal told reporters &ldquoWe will now be moving the Cabinet for the approval on the pricing and we have also decided that we will complete the auction process within this financial year&rdquopp br br No decision was taken on the 800-MHz band of CDMA spectrum as it would require more discussionppWith the revision in base price the government has reduced the pan-India reserve price to about Rs 12000 crore from the Rs 14000 crore fixed for the November auctionppIf the government sells all the blocks it would get Rs 952912 crore at the revised price from Delhi Mumbai and Karnataka Eight blocks are available for auction in each circleppThe four circles &mdash Delhi Mumbai Karnataka and Rajasthan &mdash in the 1800-MHz band accounted for more than 48 per cent of the pan-Indian reserve price The price for the 900-MHz band spectrum would be double of the auction-discovered price of 1800 MHz spectrum The price would be double the base price in circles that didn&rsquot get biddersppFrom the auction of 900-MHz band in the three circles the government will be able to get little more than Rs 17500 crore if all the spectrum available after refarming is sold The government would have 11 MHz of spectrum for auction in the 900-MHz band for the Delhi and Mumbai circles and 9 MHz for the Kolkata circleppIn the 1800-MHz band auction last month the government had set Delhi&rsquos reserve price at Rs 69306 crore for each 125 MHz block The base price for Mumbai was Rs 67845 crore for Karnataka at Rs 33012 crore and for Rajasthan at Rs 6708 croreppThe government would get Rs 27000 crore from auction and refarming in the latest round Last month the government had managed to raise just Rs 940764 crore by auctioning spectrum of 1800 MHz bandppThis means the government would get Rs 10616 crore Rs 1706 crore from November round and Rs 8910 crore or 33 per cent of the estimated earning from the upcoming round for the year The figure is a far cry from the Budgetary target of Rs 48000 croreppIndustry operators are not happy Rajan Mathews director general of the Cellular Operators Association of India said &ldquoThe move is in the right direction But there was more scope for a cut With this cut the government might see a repetition of the first round which drew lukewarm response And it is not clear on what basis the EGoM had taken the decision of a 30 per cent cut&rdquoppAnalysts said the 30 per cent reduction would not help the government attract bidders in these circlespp&ldquoEven 30 per cent reduction in these circles is unlikely to motivate the incumbents to bid for these circles aggressively&rdquo said Hemant Joshi Partner Deloitte Haskins & Sells &ldquoHowever there might be some slots if any taken by incumbents as they might be in need of additional spectrum to decongest their networks&rdquoppSivarama Krishnan executive director PwC India said &ldquoThe government may need to therefore revisit the circles of partial bidding for a revision in pricing The operators need to see a viable business case in markets that did not see successful bidding for total spectrum Also prolonging the CDMA pricing while offering 900 MHz may continue to split the industry&rdquoppThese circles are saturated with more than 100 per cent tele-density which might keep new entrants away from biddingppFollowing the lukewarm response to the previous auction that ended last month Sibal had said &ldquoThe government did not have a free hand in deciding the pricing and we should follow the market dynamics Although we have reduced the recommended price it was TRAI who set the base price as ordered by the court&rdquoppAfter the previous auction Chidambaram had said that the government would be able to meet the budget target from the remaining auctions and refarmingppInterestingly the government had earned a hefty Rs 67719 crore from the 3G auction that lasted for 35 daysp


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