Telcos Cautious, as 2G Spectrum Auction Begins

TNI Bureau: The much-hyped 2G Spectrum auctions is getting a poor response after the end of the third round with key circles such as Delhi and Mumbai finding no bidders. The government, which had hoped to raise about Rs. 40,000 crore in revenue, may end up with only about half that amount now.

There have been no bidders yet for the Delhi, Mumbai, Rajasthan and Kolkata circles and no player has applied for a pan-India licence. After the end of the second round, Uttar Pradesh (East) was the only circle that saw demand for excess spectrum. Top bidders like Telnor are very cautious.

Telcos will get another chance to bid for circles that remain unsold after the initial rounds of bidding. Then, if there are still interested bidders, the auction will continue the next day.

According to the Telecom industry, government’s base price at Rs. 14,000 crore for 5 MHz of GSM airwaves in all the 22 telecom zones is too high. It is more than seven times what companies paid in the 2008 grant process. Perhaps, this is one of the reasons for such poor responses.

However, Bidders in the 2 G auction can tap short-term foreign currency loans to pay for spectrum bought in the sale and later replace them with longer-term external commercial borrowing.

Earlier, five telecom operators — Bharti Airtel, Vodafone, Telenor-promoted Telewings, Videocon and Idea Cellular — had applied for participating in the auctions. However, with Tata Teleservices and Videocon pulling out of the auction last week, there are no bidders for CDMA spectrum. Videocon will continue to bid for GSM spectrum.

The auctions were organised after the Supreme Court ordered all cellular permits to be revoked after a flawed state sale in 2008. The cancelled permits included Uninor’s 22 licences, Loop Telecom (21), Sistema Shyam (21), Idea Cellular including Spice Communications (13), Videocon (21), Etisalat DB formerly Swan Telecom (15), S-Tel (six) and Tata Teleservices (three CDMA licences).

The auction process will go on till 7.30 in the evening, and about six to seven rounds will be held in a day.

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