50% cut in reserve price of CDMA spectrum

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The government had earlier set the reserve price of CDMA airwaves at 36.4 billion rupees ($660 million) per megahertz of spectrum.  (Reuters) The government had earlier set the reserve price of CDMA airwaves at 36.4 billion rupees ($660 million) per megahertz of spectrum. (Reuters)
SummaryAfter 50% reduction, pan-India 5MHz of 800 MHz spectrum will now cost Rs 9,100 crore.

Government today approved 50 per cent cut in the reserve price of CDMA spectrum for the auction, but companies said that there might not be any taker in the proposed auction as they feel even the reduced rates are still high.

"The Cabinet has approved 50 per cent reduction in 800 Mhz band (reserve) price which was fixed earlier at Rs 18,200 crore for 5 Mhz," Telecom Minister Kapil Sibal said.

With today's reduction in price, existing CDMA players will have to pay one-time spectrum fee on the revised base price.

"It has been decided that existing CDMA operators holding spectrum beyond 2.5 Mhz will be charged at the revised reserve price, effecting from January 1, 2013, till such time as auction determined price becomes available," Telecom Secretary R Chandrashekhar saod.

However, industry body representing CDMA players, AUSPI, said there will not be any bidder for the 800 Mhz spectrum band even at reduced price.

"50 per cent reduction is not adequate. We believe that even at 50 per cent reduction ... I will not be surprised if there are no takers," AUSPI Secretary General Ashok Sud said.

The decision "reflects the growing realisation that demand for 800Mhz is very limited. The decision taken is a step in the right direction. However, as per ground realities one would have expected much greater reduction," CDMA operator Sistema Shyam Teleservices, whose 21 licences has been cancelled by the Supreme Court, said.

GSM players body COAI said that the decision will lead to non-level playing field in the sector and it may approach court in the matter.

Sibal said that auction of CDMA spectrum will be held immediately after auction of GSM spectrum bands 1800 Mhz and 900 Mhz planned to start from March 11 onward.

Sibal said another decision to reduce price of unsold GSM spectrum in 1800 Mhz by 30 per cent has already been taken. In November 2012, GSM spectrum did not attract any bid in Delhi, Mumbai, Karnataka and Rajasthan.

The Empowered Group of Ministers on telecom, headed by Finance Minister P Chidambaram, had recommended 50 per cent or 30 per cent reduction in base price of CDMA spectrum as there was no bidder for it in November 2012 auction.

"Option of 50 per cent reduction was placed before the Cabinet as there is apprehension that at 30 per cent reduction there might be no bidder for it (CDMA)," an official had said.

Earlier, the government had fixed 11-time high base price for CDMA spectrum, compared to the amount paid by operators in 2008, for November auction.

GSM operators body COAI said that the Cabinet decision to reduce CDMA spectrum price will create unlevel playing field in the industry.

"Whole pricing rational is broken down completely and create unlevel playing field becuase now a person who has got 800 Mhz offering CDMA service can definitely under price on the GSM side," COAI Director General Rajan S Mathews said.

He said that GSM players will closely watch hearing of 2G spectrum on February 4 and "if the Supreme Court suo-moto takes congnizance and raises the issue, it will be good. If not, we will definitely be considering that."

The proposed auction plan is expected to fetch government minimum of Rs 45,000 crore.

But Sibal said "market will decide how much revenue we will get."

The Supreme Court has allowed telecom operators, whose 2G licences were cancelled last year, to operate till February 4 when it will hear the 2G spectrum case.

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