Keen to avoid a repeat of the earlier auction that did not get even a single bidder, the empowered group of ministers (EGoM) on Monday proposed to cut the reserve price of CDMA (code division multiple access) spectrum by 30-50%, subject to Cabinet approval.
“We will take the recommendations to the Cabinet and it will decide on the reserve price... we will conduct auction in the 800 MHz band in all circles since no bidder participated in that band in the November auction,” telecom minister Kapil Sibal said.
To recall, Videocon and Tata Teleservices had shown interest initially but pulled out of the auction before it actually began.
At Rs3,640 crore per MHz for all 22 telecom circles, the earlier price for CDMA spectrum was 30% more than that set for GSM (global system for mobile communication) spectrum and over 10 times higher than what the operators had paid in 2008. CDMA operators need a minimum 2.5 MHz to start services.
Cutting the reserve price is seen working to the benefit of Russian conglomerate Sistema, which runs its CDMA business in the country under the brand name MTS. The company stands to lose all its licences following the Supreme Court’s order last year and is awaiting the reply of the apex court to a curative petition it has filed.
The Department of Telecommunication (DoT) has said that it will take necessary actions to ensure that telecom operators who stand to lose their licences on January 18 following the Supreme Court’s order last year, continue their operations till the auction takes place.
“Auctions for all spectrum bands will start on March 11,” said Sibal.
For the large part, however, even halving the spectrum price may not be enough to lure bidders in, feel some experts.
“Even if the reserve price of 800 MHz spectrum is slashed by 50%, it is higher than the amount at which the CDMA licences were given earlier in 2008. As a business case is not clear for CDMA technologies going forward, there are unlikely to be many applicants for participating in the CDMA auction and hence, it is unlikely to help address the government’s concern on fiscal deficit,” said Hemant Joshi, partner, Deloitte Haskins & Sells.
According to DoT, auctions for 1800 MHz and 900 MHz band of GSM spectrum will take first and will be followed by the auction of CDMA airwaves.
The cabinet has already accepted the EGoM’s proposal to reduce the reserve price for 1800 MHz GSM spectrum by 30% in key circles – Mumbai, Delhi, Karnataka and Rajasthan – which did not receive any bid in the last round.
The two-day auction, which took place in November, did not lead to any price discovery as the bids came in at less than half the reserve price, which had been set at a whopping Rs14,000 crore for 5 MHz spectrum. The government got just over Rs9,407 crore, against an expected Rs28,000 crore.