The Cabinet on Thursday approved the recommendation of the empowered group of ministers (EGoM) to reduce the reserve price of CDMA (code division multiple access) spectrum, to be auctioned in March, by 50%. “Reserve price for 800 MHz band in all service areas be reduced by 50% from the previous reserve price as approved by the cabinet in its meeting held on August 3, 2012,” said a cabinet statement.
Keen to avoid a repeat of the earlier auction that did not get even a single bidder, the EGoM had recently proposed to cut the reserve price of CDMA spectrum by 30-50%.
To recall, Videocon and a few other firms 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, besides Tata Teleservices and Reliance Communications (RCom).
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 decision by the cabinet clearly reflects the growing realization that demand for 800 MHz is very limited,” said a Sistema Shyam Teleservices spokesperson. “The decision taken is a step in the right direction. However, as per ground realities, one would have expected much greater reduction.”
The company did not say if it would participate at a lower reserve price. The cut falls short of the operators’ expectations, said Ashok Sud, secretary general, Association of Unified Telecom Service Providers of India, the CDMA industry body.
“Our members had been hoping for a 75% cut from the last reserve price, then there may have been some significant interest from these players,” said Sud. “But to say members will not at all be interested is too sweeping a statement.”
Tata Teleservices (Maharashtra) surged as much as 6.1% after the announcement, before surrendering much of the gains to close at Rs12.62. RCom also gained nearly 2.5% to close at Rs82.95.