Advertisement

  • News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

Bharti Airtel, Idea Gain As 2G Auction Flops

Photo Credit :

India's wireless services providers rose on the Bombay STock Exchange on 15 November after the 2G spectrum auction attracted less demand than targeted by the government because prices are seen as too high.  Bharti Airtel gains 3.2 per cent, while Idea Cellular rises 3.5 per cent as of 1:54 a.m.
 
Barclays Capital says the lower pricing is a "positive outcome" for the industry, but warns there is still a lack of clarity on the timing of the government's next step to find market prices for spectrum.

The much talked about 2G mobile phone spectrum auction ended in a damp squib on 14 November with half of the airwaves on offer remaining unsold and government getting just about one-third of the targeted revenue. The tepid response to the auction will also mean that the government will find it difficult to meet the revised fiscal deficit target of 5.3 per cent of GDP.
 
The scant interest in the 2G auction was attributed to high base price.
 
The spectacular flop of the 2G spectrum auction also raises questions over the presumptive loss of Rs 1.76 lakh crore cited by the Comptroller and Auditor General of India (CAG) in 2010 for giving away spectrum at rates fixed in 2001. The 2012 2G auction rates were fixed in accordance with the price garnered in the 3G auction as the benchmark.
 
According to preliminary estimates, leave aside the Rs 40,000-crore target, the government received bids worth a "much-less" than Rs 10,000 crore (Rs 9,800 crore) in an auction that ended in two days, a far cry from the 35-day bidding for the 3G spectrum in 2010 that got it Rs 67,719 crore.

Further, as the government has promised to refund the licence free paid in 2008, the net gain to the exchequer may be almost nil.
 
The government was targeting Rs 28,000 crore from the sale of 2G spectrum in the GSM band. The CDMA sale was over before it started as the two contenders withdrew form the auction.
 
Videocon and Idea won spectrum in 7 circles while Telenor got spectrum in 4 circles. Airtel and Vodafone won spectrum in one circle each. None of the five companies in fray bid for a pan-India spectrum for which the reserve price was set at Rs 14,000 crore for 5 Mhz of airwaves.