The Cabinet today approved a 50 per cent cut in the auction reserve price for the 800 MHz CDMA spectrum, a move likely to encourage Sistema Shyam Teleservices to participate in the auction process.
“The Cabinet has approved 50 per cent reduction in CDMA spectrum (reserve) price, which was earlier fixed at Rs 18,200 crore (pan-India 5 MHz),” Telecom Minister Kapil Sibal said today. After the reduction in base price, the government has set a pan-India reserve price of Rs 9,100 crore for 800 MHz spectrum.
However, the 800 MHz band is unlikely see much interest, as it is for CDMA services alone and the government would put a cap of 5 MHz in each circle. Also, after the March auction, the government wouldn’t have any spectrum in the 800 MHz band, leaving no scope for operators to scale up operations. As operators would need at least 5 MHz for 3G and 4G services, this wouldn’t benefit operators other than Sistema Shyam Teleservices, which has a pan-India CDMA network, with 2.5 MHz in each circle. The other CDMA companies, Reliance Communications and Tata Teleservices, are increasingly shifting their attention and investment to GSM operations. However, both Reliance Communications and Tata Teleservices may bid for a few telecom zones.
“The decision by the Cabinet to reduce the CDMA reserve price by 50 per cent clearly reflects the growing realisation that the demand for 800 MHz is very limited. The decision taken is a step in the right direction. However, ground realities suggest one would have expected much greater reduction,” said a Sistema Shyam Teleservices spokesperson.
In the auction in November, the government had failed to attract bidders for the 800 MHz spectrum, as the base price was too high.
It is likely Sistema would have to spend about Rs 2,902 crore, which includes an adjustment of Rs 1,658 crore it had paid for the licence earlier. However, if the Supreme Court gives a favourable decision to Sistema on its curative petition to restore its licences, the government may fail to attract any bidder in the coming auction.
If the government manages to sell the entire spectrum in the 800 MHz band, after adjustments, it would make about Rs 1,000 crore this financial year (a third of the final bid amount in the deferred payment option).
Sibal today said the auction of GSM and CDMA spectrum would be completed by March 31 and the markets would decide the revenue the government would get.
The empowered group of ministers (EGoM) on telecom, which recommended the 50 per cent cut in CDMA reserve price, had earlier said 800 MHz spectrum would be auctioned after the auction of the 1,800 MHz and 900 MHz bands, which starts on March 11.
Ashok Sud, secretary general, Association of Association of Unified Telecom Service Providers of India, said the government should have cut the price 75 per cent to keep CDMA reserve prices substantially lower than the GSM base price.
“The government realised with the earlier price, there was no business case for CDMA players. Now, it is being questioned whether there would be a business case even after the 50 per cent reduction in spectrum price. The data play on this technology can result in active bidding participation,” said Hemant Joshi, partner, Deloitte Haskins & Sells.
In February 2012, the Supreme Court had quashed 122 operating licences of telecom operators due to irregularities in 2G spectrum allocation. These licences included 21 of Shyam Sistema Teleservices. Initially, the court had allowed these companies to operate till January 18, 2013. However, last week, the court extended this to February 4, following the Department of Telecommunications saying it wouldn’t be able to complete the auction by January 18. In May 2012, Sistema Shyam Teleservices had filed a curative petition before the Supreme Court, challenging the court’s February order. It also sought its cancelled licences be restored.
The Cabinet has already approved a 30 per cent cut in the reserve price of 1,800 MHz band spectrum used to offer GSM services.
While Tata Teleservices has already said it would discontinue CDMA operations in Jammu and Kashmir and the North-East, Sistema has told its 16 million customers it intends to continue its India operations.
