2G auction ends in two days, half of blocks unsold

The auction of 2G telecom spectrum ended on a disappointing note for the government on Wednesday, just the second day of the process, with the Centre earning only Rs 9,407.64 crore and more than half the blocks of airwaves on offer remaining unsold.

The revenue collection is far short of the budget estimate of Rs 40,000 crore, a figure that was subsequently revised to Rs 30,000 crore. The auction was also wrapped up in just two days, in stark contrast to the 3G spectrum auctions of 2010 which went on for more than a month and fetched Rs 67,000 crore.

The 2G auctions began on Monday and the government earned Rs 9,224.75 crore on the first day. There was no auction on Tuesday due to the Diwali holiday. The tepid response could upset the government's efforts to meet the revised fiscal deficit target of 5.3 per cent of GDP set for 2012-13, analysts said.

"In all, 101 out of the 144 blocks of spectrum on offer got bids. Metro cities of Delhi and Mumbai, which accounted for 40 per cent of the base price of Rs 14,000 crore for 5 MHz of 2G spectrum, drew no bids," telecom minister Kapil Sibal told reporters after the process ended on Wednesday.

The numbers are also short of the notional loss — Rs 35,000 crore to Rs 1,76,000 crore - the Comptroller and Auditor General's report said the country had suffered due to the government giving away spectrum on a first-come-first-serve basis in 2008. The auctions had become necessary after the Supreme Court, after the CAG audit, cancelled in February 122 telecom licenses given in 2008 by then telecom minister A Raja and ordered them to be auctioned instead.

Sibal said he did not wish to comment on the CAG report. "I do not want to comment on any institution but the facts are in front of the nation. The nature of the market in 2008, 2010 and 2012 are very different. It is very dangerous to extrapolate and take the situation in 2010 and apply in 2008 and similarly apply 2012 to 2008," Sibal said.

The government now plans to auction the rest of the spectrum within the current fiscal that ends in March 2013. "We will have to again try to sell the spectrum that could not find takers in this auction and that we will try to do before the start of the next financial year. We can only auction the spectrum that is left after this auction," said Sibal.

There are also reports that the department of telecommunications could approach the Telecom Regulatory Authority of India to consider fresh pricing of spectrum. This, however, could create another round of controversy. Telecom companies which have won spectrum in the current auction would then be left holding costly airwaves while others could get it at a cheaper price.

Officials said actual government revenues from the latest auctions could be even less as the companies have the option of making staggered payments wherein only 33 per cent needs to be paid upfront.

Only five operators — Bharti Airtel, Vodafone, Telewings, Videocon, and Idea Cellular - participated in the auctions. Videocon and Idea won spectrum in seven circles while Telewings got spectrum in six circles. Bharti Airtel won in one circle while Vodafone got 14 circles.

The auction process dragged on due to some excess demand in circles such as Uttar Pradesh (east) and (west) and Bihar, all 'C' circle circles where the reserve price was low. Of the total 22 circles, bids were received in only 18 circles, with four key circles with high reserve price - Karnataka, Delhi, Mumbai and Rajasthan - not drawing any bids. Barring Bihar, bidders got spectrum in all circles at the reserve price.

On Wednesday, the Cellular Operators Association of India said the problem was in the execution of auctions rather than auctions as a process to sell spectrum. The Association of Unified Service Providers of India said if most circles had been won on reserve price, there was no market discovery and that it could be better called administrative pricing.

Wrong call

Original target: Rs 40,000 cr revised to: Rs 30,000 cr

* AUCTION ends in 2 days, 101 of 144 blocks get bids

* 3G Auctions in 2010 lasted for over a month, earned Rs 67,000 cr

* Delhi, Mumbai, Karnataka, Rajasthan circles get no bids

* Only Bharti Airtel, Vodafone, Telewings, Videocon, Idea Cellular take part

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