Reliance Infotel, part of the Mukesh Ambani group and Russian telco Sistema Shyam Teleservices Ltd surprised the telecom world as they decided to abstain from participating in the much touted auction of 2G spectrum despite months of speculation that they will be amongst the key bidders in the 2G spectrum auction.
However incumbent operators, who bitterly complained that the 2G spectrum base price of Rs 14,000 crore for 5MHz would kill the industry joined the party with Bharti Airtel, Vodafone, Idea Cellular and Tata Teleservices (for CDMA) putting in their application for the auctions. Yet as was expected the tough times which telecom companies are going through has kept away any new operators to make a pitch in the country.
Amongst the new players who lost their licence due to the Supreme court order- Telewings, a new company floated by Telenor and Videocon decided to make a bid. Videocon made two applications - one for GSM spectrum and the other from CDMA. Apart from Sistema, Etisalat, Loop, S-tel the other new licencees decided to stay away from making a second entry.
Dual technology player Reliance Communications, which is under financial strain as well as Aircel which also faces tough times stayed out of the race.
As part of the 2G auction process in the 1800 Mhz and 800 Mhz band , today was the last day of filing application which ended at 5pm. The final list of bidders will be declared on 6th November and the auction of the 1800 Mhz band will start from 12 th November Speaking to journalists after the end of the application deadline DOT secretary R Chandrasekhar said: “Six telecom operators have bid and one of them which is Videocon has bid both for GSM as well as CDMA”.
In a statement explaining its decision not to bid Sistema Shyam TeleServices Ltd (SSTL) spokesperson said: “We have consistently maintained that it has been unfairly penalised in the February ruling of the Supreme Court and has filed a Curative Petition seeking to restore its licences. There is no finding or suggestion by the CAG report that CDMA spectrum was equally or anywhere near in demand as GSM. SSTL believes it has a strong case and is determined to await its hearing. “It also said that spectrum prices make the business plan unviable.
Analysts say that Reliance Infotel has backed out of bidding for the auctions due to some key reasons. One, technology has enabled them to offer voice over the net on the 4g network of reasonable quality and they could easily offer this free to take on 2G rivals. Two, if the government decides to refarm 900 Mhz band, this would come for auction next year and is a much more efficient and valuable spectrum than 1800 Mhz which they could bid for. Three it could join hands and support or buy out one of the existing players if they win the bid later on. “I think their strategy is to push the bidding up and not really to play a serious role” says an analyst.
The Union Cabinet had fixed the auction base price at Rs 14,000 crore for five MHz — 22% lower than sector regulator Trai’s recommendation of Rs 18,000 crore. The base price for 800-MHz spectrum used by CDMA operators has been fixed at 1.3 times that of the 2G spectrum in 1,800 MHz. GSM operators had however opposed the high base price saying that this would lead to an increase in tariffs for customers of an average of 64 paisa per minute and jeapordise the industry.
In the 1800 Mhz band eight blocks of 1.25 MHz band would be auctioned. However there is provision for two new operators to get a block of 5 MHz and three existing operators will get 1.25 MHz each making the total to 13.75 Mhz. In the 800 Mhz band three blocks have been earmarked for auction with an additional block of 1.25 Mhz for topping up to meet the requirement of new operators. New operators can get up to 2.5 Mhz.
The Government hopes to get over Rs 40,000 crore from the auction of spectrum as well as the one-time fee which could go a long way in reducing their fiscal deficit