May not be good enough to attract bidders, say analysts

The Empowered Group of Ministers on Friday decided to reduce the reserve price for spectrum in the four circles which did not receive any bids in the recently concluded auction.

The EGoM decided to reduce the price by 30 per cent for spectrum in Delhi, Mumbai, Rajasthan and Karnataka for the auction which will be held before March.

Earlier price

Earlier the Government had fixed the reserve price for Delhi at Rs 693.06 crore for a slot of 1.25 Mhz in the 1800 Mhz band. The price for Mumbai, Karnataka and Rajasthan was fixed at Rs 678.45 crore, Rs 330.12 crore and Rs 67.08 crore respectively. Operators stayed away from these circles saying that the reserve price was too high.

But analysts and operators said that a 30 per cent reduction may not be enough to attract bidders. “It’s a step in the right direction but operators may still find the reserve price steep,” said Prashant Singhal, Partner (Telecom), Ernst & Young.

“The metro cities, Delhi and Mumbai, are saturated and hence 30 per cent reduction doesn’t make for a meaningful business case for investment,” said Sivarama Krishnan, Executive Director, PwC India

Hemant Joshi, Partner, Deloitte Haskins & Sells, said that no new takers are likely to be excited by the auction and operators whose licences were cancelled and did participate in the November auction are unlikely to bid for these circles as they would be content providing services in the circles where they have already won the spectrum.

900 MHZ band

The EGoM also decided to simultaneously auction spectrum in the 900 MHz band in Delhi, Mumbai and Kolkata. The reserve price for this spectrum band will be twice of the 1800 Mhz band. That’s because the 900 Mhz band is considered to be more efficient and cost effective compared to the 1800 Mhz band. However, both these bands can be used to offer fourth generation technologies.

No decision has been taken with regard to 800 Mhz spectrum band, currently used for CDMA services. There were no bidders for this spectrum in the recently concluded auction.

(This article was published on December 7, 2012)
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