The 2G saga is never-ending.
On Tuesday, the empowered group of ministers (EGoM) headed by finance minister P Chidambaram approached the Supreme Court (SC) seeking extension of the 2G spectrum auction deadline till November from August 31.
The Department of Telecom felt it was impossible to wrap up the auctions by month end in light of the fact that the reserve price was decided only on Friday and the spectrum auctioneer selected on Monday.
An extension would also help telecom operators whose licences were cancelled – they were allowed to operate till September 7, according to the SC fiat in February.
“We will go back to the Supreme Court with an interim application and request to consider the fact as stated in the application,” telecom minister Kapil Sibal said.
Mahesh Uppal, director, Com First (India), a firm dealing in regulatory affairs believes the SC will extend the deadline looking at the earnestness of the government and the fact that consumers are involved.
“November seems a reasonable timeframe for completing the auctions, since the preliminary procedures will take at least till last week of August for completion,” he said. “But considering conservative bidding at these auctions, it is difficult to say whether the government will be able to raise the `40,000 crore it is expecting.”
But new telecom operators such as Uninor, Telenor and Videocon, who are said to be posting losses of `5-8 crore per day, are unhappy.
“Delays … prolong the uncertainties we face. We urge the government to conclude the auction process at the earliest,” said Telenor.
Uppal said the operators whose licences were cancelled and which got an extension till September 7, may be given a further extension beyond November
Meanwhile, Fitch Ratings said on Tuesday India’s new spectrum pricing will drive consolidation in the telecom sector and lead to higher industry tariffs.
The Cabinet set the reserve price of Rs14,000 crore for 5 MHz of second-generation spectrum for GSM players on Friday.
COAI, which represents GSM operators, said tariffs will rise by 37 to 49 paise per minute at this reserve price, and considering banks’ unwillingness to lend, it was finalising legal options.
Fitch said most telcos whose licences were cancelled are not expected to bid, considering their stretched balance sheet.
India can afford only 6 profit-making telcos, which would need to raise tariffs considerably to offset high spectrum prices, the credit rater said.
Vsevolod Rozanov, president & CEO, Sistema Shyam TeleServices, said on Tuesday the reserve price is excessively high.
“There is no rationale to support why the 800 Mhz CDMA spectrum should be priced 1.3 times GSM 1800 Mhz spectrum ... the SC had directed that true market price of the spectrum should be discovered through auction. Hence, the reserve price should be Rs1,658 crore and any change in this pricing contradicts the spirit of the order,” Rozanov said.
SSTL has now filed a curative petition before the SC protesting the price.
The Reserve Bank of India on Monday allowed banks to lend to telecom companies for the upcoming auction for spectrum, subject to mortgaging of spectrum to the lenders.
However, banks themselves may be unwilling to take on such a big credit risk.
The EGoM is yet to take a call on the one-time fee for incumbent operators.