Spectrum auction moving in circles

Re-auction of spectrum, as telecom minister Kapil Sibal says he wants to do, will be a difficult exercise so soon. Companies have spent some money and bought airwaves at the current price. For instance one of them is Telenor, a foreign company. But another foreign entity, Sistema has stayed away from the auction. To lower the price of spectrum so soon ends up showing Sistema as the smarter operator as it has supposedly bet on a change in government policy. This surely cannot be how a government will like to be portrayed as, never mind the possible court cases challenging the decision.

Yet modify the price of the airwaves, it has to, if it wants to earn anywhere close to its budget projections. The difficulty lies primarily with the pricing of Delhi and Mumbai circles. So a good idea may be to modify only their price and make those comparable with the category A circles. There were no bid for these two circles; they were also prices outrageously. So a change in prices here is more likely to be acceptable as most companies will like to pick up space here, irrespective of their investments elsewhere. The only thing stopping them is the high price.

The changes will make it possible for the government to sell slots similar to that in say 2008 when it was able to attract buyers for the two circles. A good price will see some sharp bidding and that means the government cash register will begin ringing. It will however demolish the specious argument of the former Trai chairman that prices of the more efficient 900 Mhz should be at twice that of 1,800 Mhz.

So what will the govt do now? Re-auctioning the two circles like Delhi, Mumbai by reducing the reserve price makes sense. It will also introduce sanity into the debate on what should be charged as one-time payment for these circles the next hump in the telecom debate.

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