High price main reason behind 2G auction failure: Industry

Holding the high reserve price mainly responsible for poor response from telecom companies in the 2G spectrum auction, the industry said bidding has concluded on the exact note as predicted.

“First and foremost among the many causes, is the clear recognition that an artificially high reserve price that bore no congruence to market realities was the key reason for the failure,” GSM industry body COAI said in a statement.

Besides, majority of the bidders are actually operators who had lost their licences and were compelled to participate in the auctions despite high price and limited availability, in order to sustain their customers, businesses and protect years of investments, it said.

“Finally, the limiting of spectrum available for auction, which contrary to the Supreme Court ruling (to auction the entire spectrum related to the quashing of the impugned licences), added to the sense of uncertainty and fear of irrational bidding for many potential bidders,” COAI said.

“The result of the auction clearly indicates that the reserve price was completely off the mark, with interested operators also not pitching for the circles that they had committed to participate publically,” said Prashant Singhal, partner in member firm of Ernst & Young Global. Vodafone India, which won bids in 14 circles, said it had participated in the 2G auction to secure additional spectrum.

“Vodafone India has always maintained that auctions are the best and the only transparent method for allocation of spectrum. Our decision to participate in the 2G auction was to secure additional spectrum in many circles where we have not received any new 2G spectrum since 2008. Our customers grew in that period from 60 million to 153 million,” Vodafone India said in a statement.