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Rediff.com  » Business » Bold step of rationalising spectrum base price worked: Sibal

Bold step of rationalising spectrum base price worked: Sibal

February 04, 2014 17:21 IST

Rationalisation of reserve prices in the ongoing spectrum auction helped the government to get Rs 40,000 crore (Rs 400. billion) of bids on the opening day, Telecom Minister Kapil Sibal said.

"We took the bold step of rationalising reserve prices and on the first day itself you have bids worth Rs 40,000 crore," Sibal said on the sidelines of a function to launch cloud computing services for public departments.

The government set a pan-India rate of Rs 1,765 crore (Rs 17.65 billion) per MHz as the start price for spectrum in the 1800 MHz band, which is about 26 per cent lower than the base rate in the March 2013 sale, where there were no takers for GSM airwaves.

For the 900 MHz band, it approved a rate that is about 53 per cent lower than the March auction price.

The Telecom Regulatory Authority of India had recommended a minimum price of Rs 18,000 crore (Rs 180 billion) for 5 MHz of pan-India spectrum in the 2012 auction, Sibal had said at the time.

This followed the Supreme Court order of February 2012, asking for the procedure in the 3G auction to be followed.

However, even after the government cut the recommended reserve price to Rs 14,000 crore (Rs 140 billion), the November 2012 auction ended in two days, with bids of about Rs 9,407 crore (Rs 94.07 billion) received for airwaves worth Rs 28,000 crore (Rs 280 billion).

"If you have an irrational reserve price, the market will not be attractive. I have been saying that. Now people should realise how irrational it was at that point in time for media and everybody to shout that the government is losing revenue," Sibal said.

A report by the Comptroller and Auditor General of India, which was tabled in Parliament in November 2010, pegged the revenue loss to the exchequer on account of  allocation of 2G spectrum in 2008 at Rs 1.76 lakh crore (Rs 1.76 trillion).

The controversy over the spectrum allocation also led to cancellation of 122 licences by the Supreme Court in 2012.

In the current auction, eight firms, including Bharti Airtel, Vodafone and new entrant Reliance Jio Infocomm, are in the fray.

The government received bids of about Rs 39,300 crore (Rs 393 billion) at the end of the first day on Monday, according to Telecom Secretary MF Farooqui.

"I just think that may be we got it right, that's all," Telecom Regulatory Authority of India Chairman Rahul Khullar said without elaborating when asked to comment on the response to the auction.

TRAI had suggested a pan-India reserve price in the 1800 MHz band that was 37 per cent lower than the March 2013 auction. For the 900 MHz band, it had recommended a base price that was up to 62 per cent lower.

Bids of about Rs 23,000 crore (Rs 230 billion) were received for spectrum in the 1800 MHz band, another Department of Telecom official said.

The remaining bids were received for the premium 900 MHz band spectrum, which allows mobile signals to cover about twice the area of the 1800 MHz band and requires lower operational expenses.

Even if bidders opt to pay the final auction price in instalments, the government will get at least Rs 11,590 crore (Rs 115.90 billion), exceeding the target of collecting Rs 11,343 crore (Rs 113.43 billion) in upfront payments.

"This is a matter of great satisfaction that a sector which was in difficulty, working in an environment that was exceptionally negative, we have turned it around," Sibal said.

You will continue to see it as the goose that lays golden eggs, he said.

The ninth round of the current spectrum auction ended at 12.30 pm on Tuesday with high demand for the 900 MHz band in Delhi and Mumbai, while there was excess demand for 2G spectrum in Gujarat, Maharashtra and UP West, according to industry sources.

The information could not be officially confirmed.

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