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EGoM Advises 30% Base Price Cut For Unsold 2G

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A panel of ministers has recommended a 30 per cent cut in the base price for mobile phone airwaves in four telecommunication zones that were left unsold at an auction last month. This would mean the base price will fall from from Rs 14,000 crore to Rs 11,800 crore. This recommendation will have to be okayed by the Cabinet to take effect.

The much talked about 2G mobile phone spectrum auction had ended as 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 scant interest in the 2G auction was attributed to high base price.

"The Empowered Group of Ministers (EGoM) has decided to reduce the reserve price by 30 per cent in the four circles in 1800 MHz band, where the spectrum remained unsold," a top source said.

The reserve price for last month's sale per block in Delhi was Rs 693.06 crore, while the same for Mumbai, Karnataka and Rajasthan was fixed at Rs 678.45 crore, Rs 330.12 crore and Rs 67.08 crore respectively.

The EGoM also decided to auction spectrum in 900 MHz band in Delhi, Mumbai and Kolkata simultaneously with sale of radiowaves in 1800 Mhz.

"The EGoM met today and we have decided to auction the 1800 MHz band in four circles -- Delhi, Mumbai, Karnataka and Rajasthan -- and 900 MHz band in Mumbai, Kolkata and Delhi," Telecom Minister Kapil Sibal told reporters in New Delhi.

He added that a decision on the pricing has been taken and "we will now be moving the Cabinet for the approval on the pricing and we have also decided that we will complete the auction process within this financial year."

Sibal said no decision has been taken on the auction of airwaves in 800 Mhz band.

Off Target Auction
The Rs 40,000-crore windfall that the Centre had budgeted from the spectrum auction did not materialise. After two days of bidding, the Centre raked in a mere Rs 9,407 crore — 77 per cent less than the target.
 
Telecom operators’ decision to ignore four heavy-hitting circles — Delhi, Mumbai, Karnataka and Rajasthan — that accounted for 51 per cent of Rs 14,000-crore base price was the key reason behind the poor show. The other 17 circles were sold at the base price, while Bihar recorded an increase of 9.2 per cent, piggybacking on Idea Cellular’s bid in the circle.
 
After deducting what the operators had alread paid in 2008 (Rs 4,328 crore), the net earnings are in the region of Rs 5,079 crore.

Read Also: A Frequency Mismatch 

Read also: Govt To Hold Another 2G Auction By March 31

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.

The move might also mean respite for telecom operators Telenor, Videocon and Tata Teleservices, which collectively have about 10 million subscribers in the circles where their licences expire next month. They are among the nine telcos whose mobile permits were cancelled by the Supreme Court in February this year in the 2G-spectrum allocation case. The affected operators have permission to use their allocated spectrum till January 18.

In the recently held 2G spectrum auction, Norway's Telenor was able to secure airwaves in only six circles, excluding Mumbai, Kolkata and West Bengal where it has nearly 7.5 million customers.

Tata Teleservices, which chose not to bid again for the CDMA airwaves it held in the loss-making zones of Assam, the northeast and J&K, will disconnect services to nearly 300,000 subscribers in these areas.

(With input from agencies)


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