2G auction starts November 12; few bidders seen

The Supreme Court on Monday granted an extension to the 2G auction deadline to November 12 from August 31. The auctions will now be completed by January 11, 2013.

The Supreme Court on Friday said it would grant extension on the condition that the government provided an undertaking regarding completion of the process, and added no further extensions will be allowed.

If the government failed, it will issue contempt proceedings.

“Exemplary costs may be imposed in the event of failure to complete auction process within the deadline,” a division bench of justices GS Singhvi and KS Radhakrishnan said in its ruling.

Government counsel PP Rao hastened to reassure things will move as per court direction.

On February 2, the apex court had cancelled 122 telecom licenses in connection with the 2G scam. However, these tainted telecom players were given a chance to win back their lost spectrum by participating in a fresh 2G auction on June 2, which was later extended to August 31. Subsequently, the players whose licenses were cancelled, were allowed to operate in the country till September 7.

However, given the complicated process involved in setting a reserve price, fixing a spectrum auctioneer, allocating spectrum to be auctioned and providing guidelines for license norms for incumbent players, the DoT was forced to seek yet another extension of the auction deadline to November 12.

In the process, telcos who were to wind up operations by September 7 can conduct business till January 18, 2013.
However, the extension in no way guarantees that the auctions will be a sweeping success, said analysts. With the bidding to start at a reserve price of Rs14,000 crore, new telcos are still finding the price too high to win back their cancelled licenses.

Some are not sure of participating at all, and may choose an exit route just the way Etisalat, Loop and STel said.

Hemant Joshi, partner, Deloitte, Haskins & Sells, the consultant, said many operators have indicated that at the new auction price, there is no business case and there is likelihood that they might not bid.

Rajan Matthews, director-general of COAI, the body of GSM mobile firms, said for new telcos, the auction extension makes it extremely difficult to rationalise future investments -- considering the uncertainty about obtaining an operational licence, even after waiting for four months or more.

“Further, the bidding interest for all players remains in limited circles, and it is unlikely that any player will bid for pan-India spectrum,” he said.

Mahesh Uppal, director, Com First (India), a firm dealing in regulatory affairs, agreed the extension does not necessarily guarantee participation by new players at the auction.
“I would expect no new players to contest the auctions either, since the market is already overcrowded and spectrum is expensive. For CDMA players, the spectrum costs are expected to rise as a result of the auction extension, but no tariff hike is expected as the market is too competitive. However, tariffs may rise over a longer period of time, according to market conditions,” Uppal said.

TRAI chairman Rahul Khullar had indicated that tariffs may increase by 5 paise, but subscribers are well able to afford this, after enjoying the lowest tariffs in the world for so long.

Meantime, the re-entry of Reliance Industries into telecom could force reluctant incumbents such as Bharti Airtel and Vodafone to participate in the auctions, just to maintain status quo of their market shares.

This, analysts said, may ensure the government its target of garnering Rs40,000 crore from the 2G auction.
The decisions on new licence fees for incumbents and spectrum refarming are still pending, which are likely to be taken post the outcome of the presidential reference.