Auction price halved for CDMA spectrum

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The centre has halved the reserve price for 800 mhz spectrum used by CDMA telecom service providers to make it attractive for more companies to participate in the auctions coming up in March.

The Union cabinet approved the cut on Thursday after considering a ministerial group’s recommendation of either a 30 per cent or a 50 per cent cut in the price.

The auctions in November for CDMA spectrum in the 800 mhz range were a flop with no company bidding. They complained of the high reserve price, which had been set at Rs 18,200 crore for 5 mhz of pan-India spectrum and was 30 per cent more than the reserve price for GSM airwaves.

The cut now will have significant bearing on the future of Russian telecom firm Sistema’s operations in India. A Supreme Court decision last year meant that the company must shut operations in all but one of 21 circles.

Sistema is not enthused by the price cut. The spokesperson for Shyam Systema Telecom Services said it would have expected a “much bigger reduction” after the government’s realisation that the demand for 800 mhz was very limited. But the cabinet decision was ‘a step in right direction, the company said.

Sistema invested $3 billion in India. It will continue the Indian operations beyond Friday under a temporary licence to be issued by the government with Supreme Court consent.

Even for companies already holding CDMA spectrum in the 800 mhz range, the price determined through the March auctions will apply from the beginning of this calendar year. All spectrum fees paid in the past will be adjusted against the auction-determined price.

Rajan Mathews, director-general of the lobby Cellular Operators Association of India (COAI), had told Financial Chronicle earlier that if the ministerial group recommendations were accepted it would make the 800 mhz band cheaper than the 1,800 mhz or 900 mhz band, which would be an anomaly.

Earlier the ministerial group had recommended that auction of spectrum in the 1,800 mhz and 900 mhz bands be also held in March. The government intends to complete the auction by March to shore up revenue collection in the current year.

The previous 2G auction had brought in revenue of Rs 9,407 crore when the target was Rs 40,000 crore.

The ministerial group had earlier also recommended a 30 per cent cut in the minimum price of the 1800 mhz band in the Delhi, Mumbai, Rajasthan and Karnataka circles where no spectrum could be sold.

In the 1,800 mhz band, 15 mhz each in Delhi and Mumbai and 10 mhz each in Rajasthan and Karnataka will be auctioned. The government intends to offer a top-up of 3.75 mhz if required. These circles dew a blank in the 2G auctions in November.

In the 900 mhz band, 15 mhz each in Delhi and Mumbai and 12.5 mhz in Kolkata will be auctioned. With a reserve price of close to Rs 27,000 crore for 5 mhz for pan-India spectrum, it remains to be seen if the price would enthuse telecom companies.

Given the industry’s resistance to high reserve prices in different bands, the government’s ability to mobilise Rs 40,000 crore may hinge on the 900 mhz auctions.

At present, spectrum in the 900 mhz band is held by Bharti Airtel, Vodafone and Idea Cellular. The government intends to take all of it away and re-auction it. It decided to allow licence-holding firms to keep 2.5 mhz of their 900 mhz holdings but made their participation in the auctions compulsory. Winners of spectrum will have to pay the auction-determined price for their entire holdings.

The government has also decided to retain Times Internet (TIL) as the auctioneer.

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