Firms cool to 2G auction

ENS Economic Bureau Posted: Nov 13, 2012 at 0053 hrs
New Delhi The auction of 2G mobile phone airwaves got a tepid response from telecom companies on the first day on Monday with only 55 per cent of the 176 blocks put on the block receiving bids. The value of the bids amounted to just Rs 9,200 crore — less than a fourth of the proceeds the government expected from the auctions.

The pre-Diwali 2G auctions were meant to create a level playing field in the sector that was once the poster boy of liberalisation. Major players such as Bharti, Videocon and Idea bid conservatively, which meant that high value circles such as Delhi and Mumbai received no bids and prices for the rest of the 22 telecom circles too were muted.

For consumers, the bidding pattern implies current telecom tariffs will hold but the government’s plan to earn additional revenue by charging an additional price for the 900 Mhz band is now up for re-pricing. It was earlier expected that the price of refarming will be decided by the price realised in this auction for the 1800 Mhz band.

The auction had become necessary after the Supreme Court’s February ruling cancelling 122 telecom licences issued in 2008 by then telecom minister A Raja. The court had asked the government to auction the licences instead.

The court verdict followed a CAG audit that had put a maximum notional loss to the exchequer from the ministerial allocations at Rs 1,76,000 crore. It resulted in a spate of prosecutions by the government that also created a political storm. Monday’s auctions were seen as a demonstration of the impact of a transparent method of allotting resources and are supposed to be a template for the auction of other natural resources such as coal and other mining products.

The results from the auction after the seven rounds of bidding on the first day showed there was sustained interest only for circles such as UP (West), UP (East), Bihar and Gujarat. High value circles such as Delhi, Mumbai, Karnataka and Rajasthan did not get any bids. But the auctions themselves were a world apart from the arbitrary ministerial discretion-based allotment of resources that has been the norm.

For UP (West) and UP (East), there were bids for 10 and nine blocks respectively. Bihar and Gujarat received eight bids each, Assam got bids for seven blocks. A block includes 5 Mhz of spectrum.

“Around 55 to 60 per cent of the total blocks on auction have so far been taken up and total quantum of revenue received till the end of the fifth round is a little over Rs 9,200 crore,” telecom secretary R Chandrashekhar said.

Around 33 per cent of the total receivables from the auction will come to the government in the first year and the rest will come in 10 equal installments.

The impact of low interest in the auctions will be felt gradually, as the charges for keeping the 900 Mhz spectrum and one-time spectrum fee to be charged for licence renewal from existing operators will be decided on the basis of the price that emerges out of this auction.