After failing to attract any bidder for CDMA spectrum in the auction last November, the Empowered Group of Ministers (EGoM) on telecom today decided to slash the reserve price for the 800-MHz radiowaves by either 30 per cent or 50 per cent.
It also cleared the decks for a mega auction of over 190 MHz spectrum in the 800-MHz, 900-MHz and 1800-MHz bands from March 11, expected to be completed in the current financial year.
After a meeting of the EGoM, headed by Finance Minister P Chidambaram, a top government official said: “We have decided to cut CDMA base price. The Cabinet will take a final call. Auction for 800-MHz spectrum will be conducted in March, following the auctions of 1800-MHz and 900-MHz bands from March 11.”
If the mega auction succeeds and is completed this financial year, based on the revised prices, the government could garner about Rs 20,000 crore, including one-time fee from incumbents. This is assuming all telcos pay a third of the auction price or one-time fee upfront. However, this amount does not include the payment at market rates from incumbents whose 900-MHz spectrum would be refarmed to the 1,800-MHz band.
Though the number would still be lower than the Rs 40,000 crore estimated in the Union Budget, it would be better than analysts’ projections after the November auctions brought in only Rs 1,706 crore.
The EGoM had decided the auction for the 800-MHz spectrum would take place in all telecom circles, said Telecom Minister Kapil Sibal.
Meanwhile, the Department of Telecommunications is likely to take steps to ensure telcos losing permits on January 18 due to a Supreme Court order can continue operations till the auctions.
The new CDMA base price, say analysts, is attractive for firms like Sistema whose licences were cancelled by the Supreme Court. “Sistema currently has only 2.5 MHz CDMA spectrum. It will have to pay only about Rs 2,100 crore under the new base price (a 50 per cent cut), as its earlier payment of Rs 1,658 crore for a pan-Indian licence would be adjusted,” says a senior analyst who does not want to be named.
However, Auspi Secretary-General Ashok Sud said: “This is not enough. The government should have reduced the price by 75 per cent to keep the CDMA reserve price below the GSM one.” A top CDMA player, on the other hand, argued there was little competition expected for CDMA, as most telcos were shifting to GSM. “The key issue is that it should be clarified whether or not this spectrum will be liberalised for use in other services like LTE,” he said.
| BACK IN THE GAME Projected government earning from the March auction (in Rs cr) | |||||
| 1,800 MHz | 900 MHz | 800 MHz (If base price cut 30%) | 800 MHz (If base price cut 50%) | One-time fee | |
| Spectrum to be auctioned | 50 MHz | 42.5 MHz | 97.5 MHz | 97.5 MHz | 0.00 |
| Earnings on base price | 13,745.0 | 25,315.8 | 10,425.2 | 7,446.5 | 24,898.0 |
| Earnings this financial year | 4,535.9 | 8,354.2 | 3,440.3* | 2,457.4* | 8,216.3 |
| *After adjustments, Rs 1,782.3 cr at 30% base rate cut; Rs 799.4 cr at 50% cut | |||||
| Scenario 1 | |||||
| If base price cut by 30% The govt will get a total of Rs 22,888.69 crore if base price for 800-MHz spectrum is reduced 30%. But, the actual revenue earning would be about Rs 3,000 crore less as the government would have to waive one-time fee for BSNL and MTNL | |||||
| Scenario 2 | |||||
| If base price cut by 50% If base price for 800-MHz spectrum is reduced 50%, the earning will be Rs 21,905.74 crore, minus Rs 3,000 crore (BSNL, MTNL waiver) | |||||
| More for Reliance Infotel: The 900-MHz band, considered efficient for high-speed data services, is likely to attract Reliance Infotel for LTE services. It already has 2,300-MHz spectrum and is likely to launch LTE services this year | |||||
| Spur to Sistema: Russian telco Sistema currently holds only 2.5 MHz CDMA spectrum. It has to pay Rs 2,100 crore under the new base price (50% reduction), as its Rs 1,658-crore payment for a pan-Indian licence would be adjusted | |||||
The EGoM had earlier decided to auction 1,800-MHz airwaves in Delhi, Mumbai, Karnataka and Rajasthan at a revised base price (30 per cent lower). In the 900-MHz band, the auction will be conducted in Delhi, Mumbai and Kolkata at a base price twice that of the 1,800-MHz in these circles.
The EGoM also decided to offer 34 blocks of 1.25 MHz each in the liberalised 900-MHz band in the Delhi, Mumbai and Kolkata circles. This would ensure a new entrant could get at least 5 MHz, or four blocks of 1.25 MHz each.
In the 1,800-MHz band, 15 MHz would be auctioned in Delhi and Mumbai each at base prices of Rs 485.15 crore and Rs 474.92 crore a block, respectively.
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