Telecom firms cold to 2G auction

Major telecom companies Monday showed they were not willing to buy the 2G airwaves at the price the government put them up for auction.

At the end of the first day's bidding for 176 blocks (a block includes 5 Mhz of spectrum), only 55 per cent had received bids amounting to just Rs 9,200 crore less than a fourth of the proceeds the government expected.

The poor bidding means that for consumers, current telecom prices will continue, but the government's plan to refarm the spectrum by charging an additonal price for the 900 Mhz band is now up for re-pricing.

The auctions had become necessary after the Supreme Court in February cancelled 122 licences and asked that they be auctioned instead. These were the licences given out by then telecom minister A Raja.

The court verdict was in turn a result of a CAG audit that had put a maximum notional loss to the exchequer from the ministerial allocations at Rs 1,76,000 crore. The auctions on Monday were seen as a demonstration of the impact of a transparent method of allocating resources, and are supposed to be the template for auction of other natural resources like coal and other mining products as well.

First results from the auction show that by the end of the fifth round, UP (West), UP (East), Bihar and Gujarat are the only four out of 22 circles that saw excess demand. If demand goes up to eight blocks or more for a circle, it is considered excess demand and that jacks up the base price of spectrum. Each circle has eight blocks up for auction, and three blocks for top-up for incumbent players of 1.25 Mhz each for sale.

If a circle sees a demand for eight and nine blocks by new players, base price rises by 1 per cent. If demand increases to 10 blocks, price is hiked by 2 per cent; and by 3 per cent for 11 blocks. Out of these four circles, no other circles saw excess demand. Notably, key circles like Delhi, Mumbai, Karnataka and Rajasthan did not receive any bids.

The two top contenders were UP (West) and UP (East), which received bids for 10 and nine blocks respectively. Bihar and Gujarat received eight bids each; Assam got bids for seven blocks.

A senior DoT official said there were 176 blocks on auction, and bids had been received for 95 of them. Three bids had been received for top-up.

"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 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 the incumbent operators will be decided on the basis of the price that emerges out of this auction.

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