India sets 2G base price, auction may miss deadline

India's Union Cabinet has set the reserve price for 5 megahertz (MHz) of pan-India 2G spectrum in the 1800MHz band at INR 140 billion (US$2.5 billion), which is INR 41 billion (US$739.2 million) less than the recommendation by the Telecom Regulatory Authority of India (TRAI). However, the auction may miss the second deadline extension of Aug. 31.

The Hindu reported last Friday that the base price for the pan-India spectrum rights has finally been fixed after the Supreme Court cancelled 122 existing licenses earlier in February. Only two slots of 5MHz will be put on auction, although it will be further divided into blocks of 1.25MHz during the auction, it added.

The reserve price for 5MHz of CDMA spectrum was set at INR 182 billion (US$3.3 billion), it stated.

The reserve price of INR 140 billion is about INR 41 billion less than TRAI's recommendation of INR 180 billion (US$3.2 billion) issued in April this year, which caused many industry players to voice their discontent at the prohibitive pricing. 

Successful bidders are required to make an upfront payment of one-third of the total bid amount for GSM spectrum, with the rest to be paid in 10 equal annual instalments after a two-year moratorium, the report noted. CDMA bidders will pay a quarter of the total bid initially, followed by the 10-year payments.

Telecom Minister Kapil Sibal said in the report: "[The reserve price] is only the starting point of the auction. And I have absolutely no doubt that the auction itself will give us a much higher price."

The Hindu added the pace of the auction preparation and auctioneer's appointment suggests the spectrum sale will miss the Supreme Court's second extension of Aug. 31. It might take place between October and December instead, it said.