Telecom firms hang up on CDMA spectrum

Last Updated: Mon, Nov 05, 2012 19:10 hrs

Tata Teleservices Ltd (TTSL) on Monday decided to pull out of the upcoming 2G spectrum auction, leaving no takers for spectrum in the CDMA 800-MHz band.

This will deprive the government of around Rs 18,300 crore, the value based on the base price for 95 MHz of spectrum on offer in this band. The base price of 800 MHz was fixed at 1.3 times that of 1,800 MHz, which was Rs 14,000 crore for five-MHz pan-India spectrum.

Five operators — Bharti Airtel, Vodafone, Idea Cellular, Telewings, the new company floated by Telenor, and Videocon — decided to stay put and take part in the auction of the 1,800-MHz band, used for 2G services. However, based on the earnest money deposits (EMD) made by the telcos, most experts admit that except for two-three circles, the auction will be over in only a few rounds, if not the first itself.

The Department of Telecommunications (DoT) had fixed on Monday as the last day when operators could withdraw bids for which they had furnished EMD. With such a muted response, the government’s target to get Rs 40,000 crore from the 2G spectrum auction and the one-time payment for spectrum is expected to fall by the wayside.

Analysts say based on EMD, a fair idea can be made of the circles they want to bid in. So, while the total base price of the spectrum up for grabs in the 1,800-MHz band is around Rs 35,000 crore, based on the circles operators have bid for, the government would not garner more than Rs 21,000-23,000 crore.

With operators needing to give only 33 per cent of the money upfront, they will fork out under Rs 7,500 crore. Based on the government’s own assumption that it will be able to get Rs 32,000 crore from one-time spectrum charges, this means an upfront payment of over Rs 10,500 crore (again, only 33 per cent has to be paid upfront). So, the government would not be able to get more than Rs 18,000 crore this financial year.

Late last week, Videocon was the first operator to announce it was withdrawing from the CDMA auction. The company had deposited Rs 220 crore for CDMA spectrum, which would be enough to bid in seven circles.

While Tata Teleservices had made an EMD of only Rs 22.5 crore, it was enough for them to bid for the three circles in which it had lost licences on a Supreme Court order. These circles were Assam, the north-east and Jammu & Kashmir. Top sources say the telco decided to pull out as it was unwilling to pay a high price for spectrum in circles that did not contribute significantly to revenues.

Speaking to Business Standard, Venugopal Dhoot, chairman of Videocon Group, reiterated the same point. “Our partners said the price of spectrum in CDMA is too high and it is not viable to have a business model. That is why we withdrew,” he said.

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