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Muted Response To 2G Auction

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The much-awaited auction for 2G spectrum that was freed following the cancellation of 122 telecom licences opened to a muted response on 12 November with no bidding seen for some of the telecommunications zones on offer in the auction that has been criticised by carriers as too pricey.

"There are no bidders in some circles," said a senior government official who declined to be named.

Media reports said there were no offers in some of the top circles, including the expensive Delhi and Mumbai zones, after the first two rounds of bidding.

The Indian government expects to raise around Rs 40,000 crore through the auction. Telecom Secretary R Chandrashekhar replied in the affirmative when asked if the auction started on time. The auction has started for 1800 megahertz spectrum band -- currently being used for offering 2G GSM telecom services.

BW had reported (Read: Spectrum Of Disinterest) that the operators are convinced that this auction is all set to be a dud. Many are confident that the auction will be over in a day. Others say that bidding will not go beyond the first round — the Department of Telecommunications (DoT) has targeted at least five rounds a day.

With no bidders for CDMA spectrum, the auction is a partial failure already. However, even if the auction fails, the government could get somewhere close to Rs 40,000 crore from telecom auctions thanks to the Cabinet’s decision to impose a one-time spectrum fee of Rs 30, 927 crore (provided every telco pays up) on the telecom players. However, operators need to pay only a third of the amount this fiscal.

As for the auctions, it is estimated that the Centre can earn between Rs 15,000 crore and Rs 21,000 crore, depending on how aggressively Idea Cellular bids.

India is for the first time selling second-generation mobile spectrum through an auction after the Supreme Court ordered the revoking of permits granted to eight carriers in a scandal-tainted process in 2008.

Five operators - Bharti Airtel, Vodafone Group Plc's local unit, Norway's Telenor ASA, Videocon Telecommunications, part of India's Videocon Industries, and Idea Cellular - had applied to participate in the auction.

Norwegian telecommunications group Telenor needs to win spectrum in the auction to continue operations in India, the world's second-biggest mobile phone market, as it is set to lose all its permits.

Idea Cellular, set to lose seven of its licences, has to win them back to retain its pan-India presence.

The government had set a bid starting price of Rs 14,000 crore for 5 megahertz of airwave space in all of India's 22 telecommunications zones. The base price was more than seven times what carriers paid in 2008.

The finance ministry had initially estimated the auction would raise Rs 40,000 crore, betting on it to rein in its high fiscal deficit.

Indian mobile phone market leaders Bharti Airtel and Vodafone India, which are not affected by the court order, are taking part in the auction to buy additional spectrum.

The muted response to the 2G auction is in contrast to the sale of 3G airwaves that the government held in 2010, which lasted more than a month. India raised more than $12 billion from that auction.

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