eGoM to set 3G auction terms

Written by Anandita Singh Mankotia | New Delhi | Updated: Jun 27 2009, 06:17am hrs
The auctions of 3G spectrum, airwaves that enable faster data download and video streaming on mobile phones, will now be delayed. The government will form an empowered group of ministers (eGoM) to decide the reserve price for the auctions and the number of slots per circle to be offered.

Sources told FE that the eGoM would be headed by finance minister Pranab Mukherjee, with communications & IT minister A Raja, home minister P Chidambaram, defence minister AK Antony and HRD minister Kapil Sibal as its members. Sibals presence in the group is to provide legal inputs. Sources said a formal order for constituting the eGoM is expected any time.

Earlier, the department of telecommunications (DoT) and the finance ministry were hoping that the matter would be decided by the Cabinet and, in that case, the auctions would take place in August. Industry sources have said that it takes operators around six months to roll out a 3G network once the spectrum is allocated. With the matter now headed for eGoM, auctions are sure to be delayed. Officials, however, said the projected revenues of Rs 25,000-30,000 crore from the auctions might find a mention in the Budget.

Though there was a consensus between DoT and the finance ministry on a reserve price of Rs 3,510 crore and five slots per circle in the auctions, Prime Minister Manmohan Singh wanted an eGoM to thoroughly examine the matter first and then it be brought to the Cabinet for discussions.

Early this year too, when the matter was discussed in the Cabinet, there were wide differences of views, which had led the government to form a GoM. However, with a new government coming to office, the GoM lapsed.

It was widely held then that some operators had used the layers of government to lobby their case for a higher number of slots to be put on auction.

The issue is simple: the government needs to decide the reserve price for auctions based on the number of slots. Initially, DoT had proposed a pan-India reserve price of Rs 2,020 crore for five slots. The finance ministry suggested Rs 4,040 crore.

A middle ground was found at Rs 3,510 crore for five slots.

However, eGoM would now examine whether auctions can be conducted for a higher number of slots, as spectrum in certain circles can accommodate up to 12 operators. However, if more slots are put on the block, the reserve price has to be set higher, even upwards Rs 4,040 crore, as with about 6-7 operators in each circle, bidders tend to quote a low figure in a surplus situation.

Theres also the view that all spectrum should not be auctioned in one go. Instead the government can auction five slots and sell the rest two years down the line when the fourth generation technology (long-term evolution) comes, which would fetch the government Rs 100,000 crore.