2G spectrum auction: EGoM to look at lowering of reserve price

Written by Anandita Singh Mankotia | New Delhi | Updated: Nov 16 2012, 05:59am hrs
With the 2G spectrum auctions a flop, the government is now likely to seek guidelines from the empowered group of ministers (EGoM) on how to hive off the unsold spectrum. The Department of Telecommunications is expected to put the matter before the EGoM in another three weeks time.

The development comes in the wake of the governments auction to sell 2G spectrum failing miserably on Wednesday, when it was unable to sell even half of the spectrum it had put up for auction on Monday.

The issue of selling the remaining spectrum urgently requires a solution as the government needs to accomplish the auctioning of the leftover spectrum by the end of fiscal. This is so because the matter has a direct bearing on other important issues of calculating the one-time levy and auctioning of spectrum in the 900 MHz band.

Meanwhile, the EGoM headed by finance minister P Chidambaram will decide on whether to change the reserve price in only four circles where the government was unable to sell any spectrum Delhi, Mumbai, Rajasthan and Karnataka or if it needs to lower the reserve price across all 22 circles, given the dismal demand at the current reserve price of R14,000 crore, and by how much it needs to be lowered. The latter is a decision that will have to be taken very carefully because it will have implications for the auctions that have already taken place

The EGoM had earlier reduced the reserve price from R18,000 crore set by the Telecom Regulatory Authority of India to the current R14,000 crore as the telecom industry had termed it too steep. However, given the poor results of the current auctions, sources say that a further reduction was definitely on the cards.

So far these auctions have turned out to be a damp squib even as far as the governments revenue estimates are concerned as the government earned just R9, 407.64 crore against the R40,000 crore it had expected to raise through these auctions.

While the auction for spectrum in the 800 MHz band failed to take off with the only two contestants pulling out, the one for 1800 MHz evoked tepid response. At 14, Vodafone bought into the highest number of circles, followed by Idea Cellular, which won spectrum in all the seven circles it had lost its permits. Among the new operators whose licences were quashed by the Supreme Court, Telenors India subsidiary Telewings and Videocon bought spectrum in six circles each.