* Gets bids worth about 94 bln rupees, vs target of 400 bln
* Telenor wins spectrum in six telecoms zones
* Idea, Videocon also win spectrum
* Four of 22 telecom zones saw no demand
By Arup Roychoudhury and Aradhana Aravindan
NEW DELHI/MUMBAI, Nov 14 (Reuters) - India, battling a
ballooning fiscal deficit, has raised less than a quarter of its
400 billion rupees ($7.3 billion) target in a cellphone airwaves
auction seen as too pricey by carriers.
The low prices paid will provide respite to a debt-ridden
industry suffering from heavy loans taken to pay for a previous
sale of 3G mobile airwaves, even as intense competition keeps
tariffs low and margins suppressed.
The auction of second-generation (2G) mobile phone airwaves
- used by most subscribers - has been mired in controversy, with
carriers saying the starting price was too high and that the
limited amount of spectrum on sale created artificial scarcity.
The government raised 94 billion rupees ($1.7 billion) from
an auction that ended on its second day, telecommunications
minister Kapil Sibal said. Four telecom zones, including the
expensive Delhi and Mumbai circles, saw no demand.
Unsold airwaves will be auctioned again later, he said.
"All in all, a big embarrassment for the Indian government,
but one could see it coming," said Prashant Singhal, telecom
industry leader, at Ernst and Young India.
India's first sale of 2G mobile phone airwaves by auction
came after the Supreme Court ordered the cancellation of permits
granted to eight carriers in a scandal-tainted process in 2008.
The order comes into effect in January.
The muted response this time - in contrast to a 2010 sale of
3G airwaves that raised more than $12 billion - cast uncertainty
on another spectrum auction plan for next year and a planned
surcharge on existing airwaves.
Norwegian group Telenor won airwave space in six
z ones in the auction, retaining part of the operations it would
otherwise have lost in January.
Idea Cellular won airwaves in all seven zones in
which it was set to lose its permits.
While India's more than 900 million mobile phone customers
make it the world's second-biggest market after China, intense
competition among 15 carriers means wafer-thin margins.
The competition will shrink from January, leaving seven
players with nationwide presence.
CUTTING THE DEFICIT
The auction dealt a blow to government efforts to cut the
fiscal deficit and avoid losing the country's investment grade
credit rating. India is also likely to miss its target of
raising $5.5 billion through sales of shares in state companies.
It was banking on proceeds from the auction and an
auction-determined surcharge on airwaves to help control a
deficit economists see touching 5.8 percent of gross domestic
product in the year to March.
"Managing fiscal deficit would be a tough challenge now,"
Jagannadham Thunuguntla, head of research at SMC Investments and
Advisors. "If the government cannot spring a surprise on the
divestment front, then it would be double whammy of sorts."
The government had set a bid starting price of 140 billion
rupees for 5 megahertz of 2G airwave space on offer in all 22
zones. The base price was more than seven times what carriers
paid in 2008.
The winners in the auction have the option of making a third
of the payment upfront and the balance over 12 years.
Videocon Telecommunications, part of Indian group Videocon
Industries, whose 2G permits are to be revoked, won
airwaves in six zones.
Mobile phone market leaders Bharti Airtel and the
local unit of British company Vodafone, which were not
required to bid in auction, won additional airwaves in one and
14 zones, respectively.