Spectrum salvage bid in full swing

New Delhi, Nov. 15: Telecom minister Kapil Sibal today said the outcome of the spectrum auction was a result of "market dynamics at play".

Officials in the department of telecom said the government would take a call on holding another round of auction in circles that did not receive any bids at lower reserve prices. The Centre is also likely to take a realistic look at pricing spectrum in the 800MHz and 900MHz bands.

The government earned less than one-fourth of the estimated Rs 40,000 crore from the auction because of the reluctance of operators to stump up cash for minimal blocks of airwaves (spectrum).

Norway's Telenor, Dhoot-promoted Videocon and Idea Cellular made strong bids since these players had lost their permits after the Supreme Court's order in February and non-participation would have meant winding up their businesses.

Bharti Airtel entered bids as "it did not want to be seen as boycotting the auction" and Vodafone participated only "to secure additional spectrum in many circles where we have not received any new 2G spectrum since 2008".

Analysts said all the five bidders put in bids only for circles where they saw growth and profit or the need for additional spectrum to cater to a growing subscriber base.

"During the 3G auctions in 2010, the scenario was different as 3G spectrum, which can be used to provide high-speed data services, was seen as a revenue grosser. It was a new technology and operators were willing to pay high rates for efficient radio waves," an industry player said.

"The high reserve prices, notwithstanding, the need and desire to ensure continuity of service to our subscribers was upper most in our mind," said Himanshu Kapania, managing director of Idea Cellular.

The company got 5 MHz in Tamil Nadu, Odisha, Assam, Northeast, Jammu and Kashmir, Bengal and Calcutta and also secured an additional slot of 1.25MHz in Bihar.

Meanwhile, the government's net revenue from the auction may be far less than the expected 9,407 crore after adjusting the entry fee already paid by operators in 2008 for licences that were later cancelled. Three out of the five successful bidders were among the firms whose 122 permits were cancelled. "The decision of the EGoM was clear. Adjustment will be allowed on the gross amount of the payments made by the companies and that is the credit (amount) that has been allowed in the bid process. It is by adjustment only," telecom secretary R. Chandrashekhar said today.

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