There are no bidders left in the fray for CDMA spectrum with Tata Teleservices on Monday withdrawing its application. Tata Teleservices had applied to participate in the auction for CDMA spectrum in three circles. Videocon, the only other applicant for this airwave, has already withdrawn from the auction.
In the GSM segment, there are still five players left in the race. Airtel, Vodafone, Videocon, Idea Cellular and Telenor had applied to take part in the auction for GSM spectrum. Monday was the last day for the operators to withdraw their applications.
The auction for GSM spectrum will start on November 12, but, clearly, the interest level is low. Incumbent players want the auction to get over at a low bid price because they have to pay a one-time fee based on the final bid price.
While the auction for CDMA spectrum has become a damp squib, the bidding for GSM is also likely to be muted which could end the auction very quickly. This is in sharp contrast to 2010 when the auction for 3G and broadband spectrum lasted for over a month with the final bid price ending up many times the base price. The Government ended up getting over Rs 1 lakh crore from the spectrum sale which helped bridge the fiscal deficit to a large extent.
Impact revenues
But this time around the lack of competition will impact Government’s revenue targets. The Finance Ministry had set a target of Rs 40,000 crore from the sale of spectrum this year but the actual income could be less than half that. Analysts pointed out that the high base price could make the auction a damp squib. While GSM spectrum will start at Rs 14,000 crore for 5 Mhz, the CDMA spectrum base price was set 1.3 times higher on grounds that it was more efficient.
Hemant Joshi, Partner, Deloitte Haskins & Sells, said: “At Rs 1,600-crore licence fees paid by operators in 2008, it appeared that there was no business case. Then it is unlikely to have business case with payment of Rs 18,000 crore.”
This puts a question mark on the future of CDMA technology in the country. As it is operators using the CDMA technology in India have not taken off the way operators have done in some western markets. Most CDMA players in the country, including Reliance Communications and Tata Teleservices, have got dual technology licences to move into GSM market.
However, Russian major Sistema could gain from this development. The exit of Videocon and Tata Tele could strengthen its argument that its licences should be restored since it had applied for CDMA spectrum for which there was no demand. Sistema’s licences were cancelled by the Supreme Court along with those of other players given licences in 2008.