Govt ends up with less than Rs 9,500-cr from 2G auction

The auction for 2G spectrum ended today with Vodafone bagging additional spectrum in 14 circles followed by Idea Cellular with seven circles.

Among the new players Telenor and Videocon managed to win back spectrum in only six circles each. Both these players had got licences in 2008 which now stand cancelled due to the Supreme Court order.

The Government will get just Rs 9,407 crore in total.

The actual income this year will be much lower as the operators are allowed to pay one-third of the bid amount upfront and the balance in instalments.

In addition, the bid money will be offset against the entry fee already paid by some of the bidders in 2008.

If the Government had managed to sell all the spectrum it put on the block then it would have got at least Rs 27,000 crore. However, of the 176 blocks put on sale (each block of 1.25 Mhz), bids were received only for 101 blocks.

Key circles of Delhi, Mumbai, Karnataka and Rajasthan did not get any bids. The final bid amount was higher than the initial base price only in Bihar.

All other areas were sold at base price indicating that the auction got over without any bidding.

Different market, now

When asked why the auction had failed to get higher bids Communications and IT Minister Kapil Sibal said that the Government had only followed Supreme Court orders in fixing the reserve price. “The market in 2012 is different from the market in 2008 and 2010,” he said adding that the Government will have another round of auction to find buyers for unsold spectrum.

Bidders and analysts blamed the high reserve price for the auction failure.

High reserve price

Prashant Singhal, partner in member firm of Ernst & Young Global, said, “The results of the auction clearly indicate that the reserve price was completely off the mark. The Government’s plan of raising Rs 40,000 crore has fallen flat and they would now need to go back on the drawing board to figure out the market driven price.”

Incumbent operators who have to pay a one-time fee based on the final bid price of the auction said that this was not a market driven price. “Any price discovered through this auction cannot be termed as market determined price for any future decisions because the complete spectrum put to the auction could not be sold.

“It was distressed buying to save the investments already made by the operators whose licences have been cancelled,” said Rajan Mathews, Director-General, COAI.

Senior officials at the Department of Telecom said that the TRAI may be asked to review the base price for the next round of auction.

Vodafone, the star bidder in the round of auction said that operators should be allowed to bid for all spectrum available.

“This will result in effective participation and bidding for spectrum, thus leading to a wider service offering with better quality of coverage for customers, while Government will be best placed to meet its fiscal demands,” it said.

> Thomas.thomas@thehindu.co.in

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