New Delhi, Nov. 14: The government managed to raise a piffling Rs 9,407 crore from the 2G spectrum auction that closed today, far less than the targeted Rs 40,000 crore.
This is the first time that a telecom spectrum auction in India has bombed and immediately raised the question whether the government had overplayed its hand by trying to squeeze debt-laden telecom companies to cough up big bucks for a scarce resource.
The government had set a reserve price of Rs 14,000 crore for 5Mhz of pan-Indian spectrum, seven times of what telecom companies had paid in 2001.
There were no bidders for pan Indian spectrum anyway because of the tough bidding rules. Worse, there were no takers for overpriced spectrum in Delhi and Mumbai.
The poor yield from today’s spectrum sale should bring some sobriety to the sky-high estimates that the CAG had made two years back while computing the presumptive loss the government had suffered by doling out 122 licences in January 2008 through a scandal-tainted process that the Supreme Court eventually overturned.
Analysts said the huge premium for radio waves used just to offer voice services did not merit aggressive bidding.
Operators may bid more aggressively for the auctions of more efficient spectrum that are scheduled later. The government may speed up the auctions to recoup the losses from today’s sale.
Only new entrants such as Norway’s Telenor and Videocon who need spectrum to continue operations put in strong bids, albeit in select circles.
Telenor won spectrum in six circles. Local players such as Videocon and Idea Cellular bought airwaves in six and eight circles, respectively, while Bharti Airtel and Vodafone India won spectrum in 1 and 14 circles, respectively.
Telecom minister Kapil Sibal confirmed that the spectrum sale got the exchequer “a little over Rs 9,400 crore”.
He added that 101 of 144 blocks of spectrum on offer got bids. Sibal refused to comment on the CAG’s estimation of Rs 1.76 lakh crore as the loss to the exchequer in giving away spectrum on a first come, first served basis in 2008.
The 2G licence allocation during former telecom minister A. Raja’s time fetched the government Rs 9,500 crore, while the 3G auction that took place in 2010 got the government around Rs 70,000 crore.
All 22 telecom circles in the country were put on the block in the auction that began on Monday. Delhi, Mumbai, Karnataka and Rajasthan did not find any takers.
According to GSM industry lobby group COAI, the failure of the auction was due to flawed execution and not the sale itself.
“An artificially high reserve price that bore no congruence to market realities was the key reason for the failure,” said Rajan Mathews, director-general of the COAI.
Interestingly, the winning price in eight top circles, which included UP (West), Calcutta, Maharashtra, Andhra Pradesh, Gujarat and Tamil Nadu, was at a discount of 16.42 per cent to the winning price at the 3G auction.
Poor response to the 2G telecom spectrum auction is likely to make it difficult for the government to meet the revised fiscal deficit target of 5.3 per cent of the gross domestic product (GDP) in 2012-13.
The operators may make their payments in a staggered manner, meaning the government will initially receive just 33 per cent of the winning bid, with the rest of the money accruing over 10 years.
“It would be better to pay an interest of over 9 per cent over the next couple of years than pay an upfront fee,” said an executive of a top telecom company.
Videocon has won circles such as Uttar Pradesh East, Uttar Pradesh West, Bihar, Gujarat, Haryana and Punjab.
Telenor bagged Uttar Pradesh East, Uttar Pradesh West, Bihar, Gujarat, Himachal Pradesh and Maharashtra (excluding Mumbai).
Idea has won back all circles which they lost because of the spectrum order in February 2012.
Sources had said Mukesh Ambani-promoted Reliance Industries could buy Videocon’s 2G licences. In 2010, Reliance entered the telecom business by acquiring Infotel Broadband, which had won pan-India broadband airwaves.