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India 2G auction canceled due to low interest

Country's 2G spectrum re-auction planned for March will not happen as major telcos did not submit their bid for GSM airwaves, while only one telco applied for CDMA airwaves. Report points to possible cartel behavior.
Written by Liau Yun Qing, Contributor

India's 2G spectrum auction for 1800MHz and 900MHz bands originally planned for March has been canceled due to low interest among telcos which say the reserve price set by the government is too high.

GSM telcos deemed the base price of 2G airwaves too expensive.

A Economic Times report Tuesday said the country's top mobile operators Bharti Airtel, Vodafone India, and Idea Cellular did not apply to bid in the March spectrum auction by the application deadline, on February 25. The report said only Sistema Shyam applied to bid for the 800MHz band and it will receive the spectrum at the base price.

The government had set a reserve price of 28 billion rupee (US$517.3 million) per MHz for GSM and 36 billion rupee (US$665.1 million) per MHz for CDMA.

According to the Economic Times, telecom secretary R. Chandrasekhar said the auction for both bands had been scrapped. "No, there will not be an auction in both 1800MHz and 900MHz bands. In all probability, the matter will have to go to the Empowered Group of Ministers before a final view can be taken to work out a way and go forward," Chandrasekhar told the newspaper.

Executives from Bharti Airtel and Idea Cellular told the newspaper they did not bid for two reasons. They found the base price too high and "unrealistic" even when compared to 4G auctions in developed countries such as the United Kingdom and Europe.

The companies added that their debt levels and weakening cash flow did not permit them to raise more money to pay for the spectrum fees.

However, the report pointed to possible cartel behavior among the telcos. BK Syngal, former chairman and managing director of VSNL, who now works for telecom consultancy Dua Consulting, told the Economic Times: "The conspicuous absence of bidders for the second round of 2G auctions is a clear case of cartelization by operators to force the DoT (India's Department of Telecommunications) into a corner, and bring it to the negotiating table to use the clause of 10-year automatic extension of licence.

"However, the government has brought this upon itself through improper application of Supreme Court judgement," Syngal said.

In February 2012, India's Supreme Court revoked 122 2G licenses due to allegations of fraud in the bidding process between 2001 and 2007. The airwaves were put up for bidding in November 2012 but raised just INR 94 billion (US$1.7 billion), much lower than the government's target of INR 400 billion (US$7.3 billion).

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