The governments plan to auction spectrum in the 900 and 1,800 MHz bands on March 11 to raise around R43,000 crore crashed on Monday with not a single GSM operator applying to participate in the bids. Sistema Shyam, which is a CDMA operator and whose 21 licences were cancelled by the Supreme Court last year, was the lone applicant for spectrum in the 800 MHz band, which is reserved for CDMA operators.
Monday was the last day for the companies to submit applications if they wished to participate in the auctions.
With the Union Budget slated to be presented in Parliament on Thursday, it remains to be seen what steps the government takes to salvage the situation as it needs the proceeds to reduce the fiscal deficit. One option is to reduce the reserve price as the industry has clearly indicated that the current reserve price is unviable.
Telecom secretary R Chandrasekhar told FE that the government would explore all options to see how spectrum can be auctioned in the 1,800 and 900 MHz bands.
The decisions on reserve price are taken by an empowered group of ministers headed by finance minister P Chidambaram before approval by the Cabinet.
Even if the government were to reduce the reserve price, it may not be able to auction spectrum in the 900 MHz band because the two operators Bharti Airtel and Vodafone from whom it has to refarm the spectrum got a sort of relief from the Delhi High Court last week. The two had challenged the governments decision to auction the 900 MHz band spectrum by taking it away from them even when the two companies had submitted their application to the DoT for renewal of licence as per the contract. The court has given the DoT two weeks time to decide on their application for renewal and the companies the liberty to challenge the decision before it if they are not satisfied with it.
Meanwhile, the Supreme Court has ordered the government to put up for auction all the spectrum which got vacated due to the cancellation of 122 licences last year in February. The government had not put all spectrum for auction in November, stating that it needed to reserve some for refarming purposes. After the SC order, it had said that it would conduct another round of auctions after the March one. Thus, a scenario has emerged where the supply of spectrum has become more than demand and so the companies would not be willing to pay a high price for it.
The auctions were crucial for the government in terms of revenue because in the first round in November 2012, it could mop only R9,407 crore against the budgeted target of R40,000 crore. It had subsequently reduced the reserve price in the 1,800 MHz band in the four circles of Delhi, Mumbai, Karnataka and Rajasthan by 30%. These circles had not seen any takers in November. The reserve price in the more efficient 900 MHz band was double that of 1,800 MHz. Here, auctions were slated to take place in Delhi, Mumbai and Kolkata circles. While the licences of Bharti is up for renewal in November this year in Delhi and Kolkata, Vodafone needs to renew for Delhi and Mumbai. These two companies have spectrum in the 900 MHz band in these circles and the governments plan was that they can retain 2.5 MHz of their total spectrum and participate in auctions to win back another 2.5 MHz. In the 1,800 MHz band, the plan was that the entire spectrum held by the companies would be put up for auction and they would have to win it back.
Though Sistema Shyam has come forward to take spectrum in the 800 MHz CDMA band, it would not mean anything to the government in terms of revenue as other CDMA players like Reliance Communications and Tata Teleservices have not evinced interest in auctions in this band. There were no takers for spectrum in this band in the November auctions also, which forced the government to later reduce the reserve price by 50%. Thus, a company like Sistema can procure spectrum at around Rs 2,900 crore against Rs 1,651 crore it paid in 2008.
* Not a single GSM operator applied to participate in the auction of spectrum in the 900 and 1,800 MHz bands
* Sistema Shyam, whose 21 licences were cancelled by SC, was the lone applicant for spectrum in 800 MHz
* Govt to explore all options to see how spectrum can be auctioned in the 1,800 and 900 MHz bands, says telecom secy
* One option is to reduce the reserve price as industry has clearly indicated that the current price is unviable