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2G Spectrum To Flop? Only Sistema To Bid For CDMA

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Indian government's 2G spectrum auction next month looks set to flop with just one company, Russia's Sistema, making application for participation in sale of airwaves, that too in just one of the three bands for which bids were invited. This is perhaps a sign that the government may have to drop the reserve price of remaining airwaves to attract interest, analysts said.

The high price as well as the legal issues led to the carriers shunning the auctions, Rajan Mathews, director general of industry lobby Cellular Association of India, said.

The Department of Telecommunications (DoT) had announced conducting auction for spectrum unsold in November along with spectrum that is being held by operators whose licences are due for renewal in 2014.

Even after government slashed the base price by 50 per cent for CDMA spectrum (800 Mhz band), no telecom company applied, except Sistema's Indian joint venture Sistema Shyam Teleservices which expressed interest for CDMA spectrum in select circles.

Sistema Shyam TeleServices, which saw its permits revoked in 21 service areas after an Indian Supreme Court ruling on a massive licensing scam, last week said it would cease operations in 10 of those zones and bid in select areas. The company has not specified how many licences it would bid for, but if it did bid for the maximum remaining airwaves in all 11 remaining areas, it would have to pay about Rs 5,300 crore at the reserve price, and would be allowed to offset about Rs 1,590 crore it paid for earlier permits.

The price of spectrum (1800 Mhz band) in Delhi, Mumbai, Karnataka and Rajasthan was reduced by 30 per cent after no bid was received for them in November. But even after a price cut, there was no taker.

"No application was received for the second round of 2G GSM spectrum till the official declared time of 5:00 pm today, while SSTL was the lone applicant in the CDMA spectrum auction," a DOT source said.

Reacting to the muted interest shown by companies, Telecom Minister Kapil Sibal told PTI: "Fate of this sector is being decided somewhere else. Government has done its best and meticulously followed the Supreme Court order. I think that government hands were tied....and the result is for everybody to see."

While cancelling 122 2G telecom licences, the Supreme Court on 2 February 2012 asked government to allocate spectrum to companies through auction. The Comptroller Auditor General had estimated that spectrum allocated to telecom companies in 2008 could have fetched the national exchequer a revenue of around Rs 1.76 lakh crore.

Selling airwaves, along with sales of stakes in state-run companies, is a crucial part of government plans to curb the deficit. The spectrum auction next month could fetch government around Rs 43,000 crore if all airwaves were sold at base price. The demand for pan-India CDMA airwaves could fetch government revenue of around Rs 6,000 crore.
One economist said it would be tough for the government to meet its target to contain the fiscal deficit at under 5.3 percent of gross domestic product for the year ending in March, with no bidder for the bulk of the airwave auction. "This is a big disappointment for the (money) market," said Rupa Rege Nitsure, chief economist at state-run Bank of Baroda.

The government will need to further cut the minimum bid price for the 1800 megahertz frequency in the Delhi, Mumbai, Karnataka and Rajasthan zones on the top of the 30 percent cut it approved in December to revive interest in the zones that found no takers in November, analysts said.