Govt to take call on spectrum pricing for auction tomorrow

The Cabinet may tomorrow decide on pricing of telecom spectrum to be sold the second round of auction beginning March 11.

The Cabinet, headed by Prime Minister Manmohan Singh, is scheduled to consider the recommendation of Empowered Group of Ministers (EGoM) for pricing of unsold 2G spectrum in the 1800 MHz band from the previous auction as well as for the offer of airwaves in the more efficient 900 MHz band and 800 MHz spectrum for CDMA-operators.

Sources said the EGoM had recommended reducing the start price for the auction of CDMA spectrum by up to 50 per cent and that of unsold 1800 MHz spectrum in four circles by 30 per cent.

Reduction in price may help companies like Sistema of Russia to bid for spectrum to make up for the one they lost when the Supreme Court cancelled its licence and a host of other licenses in February last year.

The Supreme Court has allowed the companies whose licences were cancelled to continue operations till February 4 when the government is supposed to inform it of the final reserve or minimum price for the spectrum sale.

While Sistema's 21 out of 22 permits are at stake, Norway's Telenor may bid for one of the four left-over circles from the almost-failed November auction of 2G spectrum in the 1800 MHz band.

Telecom Minister Kapil Sibal had previously stated that the auction for unsold 1,800 MHz second-generation, used for mobile telephony, in four markets, including New Delhi and Mumbai is planned to begin from March 11.

The government will sell CDMA and premium GSM spectrum in 900 Mhz after the GSM auction, he said.

About 70 per cent of the airwaves went unsold in the November auction that raised Rs 9,407 crore against government's expectation of Rs 28,000 crore.

The November auction of CDMA spectrum (800 MHz) did not attract bidders due to high reserve price. The reserve price set was 11 times higher than what operators paid in 2008.

The government had earlier fixed CDMA spectrum price at 1.3 times than the GSM spectrum in 1800 Mhz band. At that rate, each block of 800 Mhz band would have cost Rs 4,550 crore, and Rs 18,200 crore for 5 Mhz, pan-India.

"Since CDMA technology has few takers, EGoM felt that it may attract no bidders; hence it will recommend option of 50 per cent price cut as well," said a source.

Back-of-the envelope calculations showed that if the government cuts CDMA spectrum price by 30 per cent, the auction of 800 Mhz together with 900 Mhz and 1800 Mhz airwaves would get up to Rs 48,000 crore.

If the reserve price reduction is 50 per cent, it will get about Rs 45,000 crore at the base price.