Home »  Money

800 MHz flops as Tata Tele exits race

Tuesday, 6 November 2012 - 8:10am IST | Place: Mumbai | Agency: dna

The government had expected three CDMA operators when it set itself a target of Rs45,000 crore revenue from 2G spectrum auctions, including CDMA and GSM.

The government had expected three CDMA operators when it set itself a target of `45,000 crore revenue from 2G spectrum auctions, including CDMA and GSM.

But on Monday, Tata Tele Services (TTSL), the last CDMA bidder in the fray, pulled out, leaving the 800 MHz CDMA spectrum auction effectively aborted, and punching a `6,500 crore hole in government’s expectation.

TTSL’s move follows Videocon’s similar withdrawal on Friday.
MTS and Reliance Communications, the other two CDMA operators, had decided not to bid.

TTSL and Videocon had already paid `22.5 crore and `220 crore, respectively, towards deposit money which will be refunded now as Monday was the last date for withdrawals.

Industry sources said TTSL probably found no business case for the three circles — Jammu and Kashmir, Assam and the North-East region — that it had initially decided to bid for, which were cancelled by the Supreme Court in February.

As the sole bidder, TTSL could have bagged the spectrum at the reserve price of `18,200 crore — too expensive for a company with only 25.20 million CDMA customers as of June 2012, much lower than 55.03 million GSM subscribers.

Even after Monday’s exit, TTSL will receive 4.4 MHz of the CDMA spectrum it had paid for in 2008.

TTSL declined to explain its move. Ashok Sud, secretary-general of Auspi, an industry body representing CDMA operators, said TTSL’s pull-out proves that the CDMA reserve price at 1.3 times that of the GSM reserve price was too high. In this regard, the government’s stance has been that the 800 MHz spectrum is more efficient.

Hemant Joshi, partner, Deloitte Haskins & Sells, disagreed. “Telcos have licences for dual (CDMA and GSM) services. Customers prefer GSM connections as handset options, SIM cards and a wide choice of providers are easily available.”
Jaideep Ghosh, partner, KPMG Advisory Services, said there is now excess spectrum for existing CDMA players like Reliance Communications and TTSL. “They may want to give up this spectrum and focus on GSM, rather than pay a very high price for both bands.”

TTSL’s exit, Ghosh said, may not impact on the 2G auctions much, except causing subdued bidding, given that the government will allow operators to retain 2.5 MHz spectrum as part of partial spectrum refarming rules.

Rajan Matthews, director-general of the Cellular Operators Association of India, said, “The government may decide to wait for 1-2 years and then club the CDMA spectrum with another spectrum band. Any such move would prove a dampener on 2G auctions.”

The final list of bidders for the `35,000 crore 1800 MHz (2G GSM) auction will be out today, and is expected to show more exits of bidders, further impacting the state exchequer. No more than `23,000 crore is now expected from this auction. Operators need to pay only 33% of the winning amount upfront, so the government may net around `18,000 crore.


Jump to comments

Recommended Content