Move prompted by zero participation by CDMA players in November auctions
Decks have been cleared for Sistema Shyam to participate in the forthcoming CDMA spectrum (800 MHz) auction with the Cabinet on Thursday approving a 50% reduction in the reserve price.
With this, Sistema Shyam ? where Russian conglomerate Sistema Group holds majority stake ? would have to pay as low as R2,900 crore for 2.5 Mhz of spectrum in 21 circles after its entry fee of R1,600 crore, which it paid in 2008, is adjusted. If the company chooses to bid for 5 Mhz spectrum, it can still keep its payout low, almost in the same region, by going for only limited circles.
Sistema Shyam welcomed the decision to halve the reserve price, but said that keeping ground realities in mind, the reduction should have been greater.
?The decision by the Cabinet to reduce the CDMA reserve price by 50% clearly reflects the growing realisation that demand for 800 Mhz is very limited. The decision is a step in the right direction. However, as per ground realities, one would have expected much greater reduction,? the company said in a statement.
The empowered group of ministers (EgoM) on spectrum pricing on January 7 had recommended that the government either reduce the reserve price by 30% or 50%. The November auctions had not seen participation by any players in the CDMA space.
The base price of CDMA spectrum is fixed at 1.3 times the GSM spectrum in the 1,800-Mhz band. The pan-India base price of GSM spectrum was R14,000 crore, so at 1.3 times of it, it was earlier at R18,200 crore. A 50% reduction would mean it would come down to R9,100 crore for 5 Mhz, pan-India spectrum. A company like Sistema currently has 2.5 Mhz spectrum, which is sufficient to run CDMA networks, and for this quantum, it would need to pay R4,550 crore.
If it participates in the auctions, the government would adjust its entry price of R1,600 crore paid in 2008; so, it would have to pay only R2,900 crore. Even if the company wants to bid for 5 Mhz spectrum, it is certain that it would not go for all the 22 circles; so, its costs would come down considerably. The government was in a fix over the issue of Sistema’s licence cancellation by the Supreme Court in February 2012 since the Russian government holds stake in the company and had communicated to the government that its investments need to be protected.
Sistema had not participated in the November auctions, calling the price too high and also filed a curative petition in the SC. The other two operators to provide CDMA services ? RComm and Tata Teleservices ? are not likely to participate in the bids, though they did not comment officially.
The two operators have 5 Mhz spectrum and, for 50% of it, would have to pay a one-time charge. Since they also provide GSM services, it is quite likely that they would refund the excess CDMA spectrum to the government rather than paying any one-time charge since the CDMA spectrum is not liberalised and average revenue per user is much lower than GSM services. Even if they decide to retain the excess spectrum beyond 2.5 Mhz, their one-time charge would now come down considerably.
The industry body, Auspi, expressed dissatisfaction at the reduction, stating that it should have been higher and said that it would not be surprised if there were no takers for the spectrum in the auctions. ?The Cabinet has approved 50% reduction in CDMA spectrum reserve price, which was fixed earlier at R18,200 crore (pan India 5 Mhz),? the telecom minister Kapil Sibal said.
He said that the second round of auctions wherein the government will put up 800 Mhz, 900 Mhz and the previously untouched circles of 1,800 Mhz, for auctions will commence by March 11 and end by March 31. “It has been decided that existing CDMA operators holding spectrum beyond 2.5 Mhz will be charged at the revised reserve price, effective from January 1, 2013, till such time as auction determined price becomes available,” said telecom secretary R Chandrashekhar.
Other Decisions
* NTPC land for Delhi govt to help ease traffic: Union Cabinet approves transfer of land from state-run NTPC’s Badarpur power plant to the Delhi government. The move will help widen a link road on NH-12 and ease traffic congestion in South Delhi
* Budgetary ceiling for annuity payments for PPP Projects: CCEA approves budgetary ceilings for annuity commitments under Public Private Partnership (PPP) projects across sectors. The move is expected to streamline the process of structuring and sanction of projects under annuity mode of PPP
* Continue JNNURM project mandate: CCEA gives approval to mandate continuation of Jawaharlal Nehru National Urban Renewal Mission to sanction new projects and capacity building activities till March 31, 2014, under the Urban Infrastructure and Governance (UIG) and Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) components of JNNURM.
* Upgradation of Tanda-Rae Bareli-Banda section of NH-232 in UP: CCEA okays widening of NH-232 to two lanes with paved shoulders from Tanda to Banda in UP at an estimated cost of R1,118.79 crore. The project will be executed by NHAI on Engineering Procurement and Construction mode.
