India's Cabinet has approved a 30 percent cut in the reserve price of the 1800 megahertz (MHz) airwaves in four telecom zones, which were unsold after last month's 2G spectrum auction.
An Economic Times report Thursday stated the 1800 MHz airwaves in Delhi, Mumbai, Karnataka and Rajasthan were not bidded for during the November auction because the minimum price was too high. As such, the Cabinet, headed by Prime Minister Manmohan Singh, has approved a proposal by the empowered group of ministers (EGoM) to cut the reserve prices by 30 percent, it said.
The reserve price for Delhi was originally priced at INR 6.9 billion (US$127.2 million) per 1.25MHz block, while Mumbai was at INR 6.7 billion (US$124.4 million), Karnataka at INR 3.3 billion (US$60.6 million), and Rajasthan at INR 670 million (US$12.3 million), the report noted.
The 2G spectrum auction in November is widely regarded to be a flop as the Indian government received bids totaling only INR 94 billion (US$1.7 billion), far below its INR 400 billion (US$7.3 billion) target. In comparison, the 3G auction in 2010 generated INR 677 billion (US$12.4 billion) for the government, it added.
Cabinet approves 900MHz auction too
The Cabinet also approved the auction of 900MHz airwaves, which will be up for renewal in November 2014, a separate Economic Times report Thursday stated.
In response to the Cabinet's decisions, Rajan Mathews, director general of the Cellular Operators Association of India (COAI), said there needs to be transparency over how the spectrum reserve prices are arrived at.
"Participating is not the problem. All our operators, by and large, especially when 900MHz is involved, will be interested. The question is what is the right price," Mathews said.
Other industry observers said the new reserve prices for 1800MHz in the four zones are still high despite the reduction, and is not sufficient to motivate potentials bidders.
"It's very unlikely that there will be high participation even at this price . Though the circles on offer are very valuable, the price is disproportionate to the potential revenue," said Mahesh Uppal, director of ComFirst India, in a report by DNA India Friday.