Spectrum auction on March 11; EGoM for up to 50% cut in base price
New Delhi: An Empowered Group of Ministers (EGoM) Monday recommended reducing minimum price for sale of spectrum used by CDMA mobile operators by up to 50 percent in the second round of auction planned to begin on March 11 to raise a minimum of Rs 45,000 crore.
The EGoM headed by Finance Minister P Chidambaram recommended to the Cabinet that the reserve or the starting price, for the airwaves be cut by 30 to 50 percent, officials who wished not to be identified said.
The Cabinet will take a final call on the spectrum price.
The auction for the 1,800 MHz second-generation phone spectrum in four markets, including New Delhi and Mumbai that went unsold in the November 2012 auction, will start March 11, Telecom Minister Kapil Sibal told reporters here.
The government will sell 800 MHz and 900 MHz spectrum after the GSM auction, he said.
About 70 percent of the airwaves went unsold in the November auction that raised Rs 9,410 crore, less than 25 percent of the amount the government was targetting to raise from spectrum sale this fiscal.
The EGoM had last month recommended a 30 percent cut in reserve or base price for the second-generation spectrum that wasn't sold in the auction.
The Cabinet may decide this month on the minimum price for the 800 MHz sale, Sibal said.
The November auction of CDMA spectrum (800 MHz) did not attract bidders due to high reserve price. The reserve price set was 11 times higher than what operators paid in 2008.
Back-of-the envelope calculations showed that if the government cuts CDMA spectrum price by 30 percent, the auction of 800 Mhz together with 900 Mhz and 1800 Mhz airwaves would get up to Rs 48,000 crore. If the reserve price reduction is 50 percent, it will get about Rs 45,000 crore at the base price.
The EGoM today finalised the schedule for auction of unsold GSM spectrum of the first round and 900 MHz spectrum together with 800 MHz band airwaves used for offering CDMA-based mobile services.
"All the auction for which announcement has been made today will be held in March 2013," Sibal said.
The auction will start with the unsold spectrum in 1800 Mhz band at a reserve price, 30 percent lower, compared to the one in the previous round held in November, 2012.
"The auction for 1800 MHz band in four circles in which bids were not received in November 2012 will be put up for auction. Reserve price will be 30 percent lower than the reserve price that was fixed in November auction," Sibal said.
The EGoM, however, left it to the Cabinet to decide on cutting base price of CDMA spectrum by 30-50 percent, sources said. The previous reserve price -- 11 times high than the amount operators paid in 2008 -- did not receive any bids.
Sibal said EGoM has decided to "conduct auction in the 800 MHz band in all circles since no bidder participated in that band in November auction...We will take recommendations to Cabinet and it will decide on price."
The government had earlier fixed CDMA spectrum price at 1.3 times than the GSM spectrum in 1800 Mhz band. At that rate, each block of 800 Mhz band would have cost Rs 4,550 crore, and Rs 18,200 Mhz for 5 Mhz, pan-India.
Sources said the EGoM will recommend 30-50 percent rate cut for CDMA spectrum reserve price -- based on the decision for price cut of GSM spectrum in the 1800 Mhz band.
"Since CDMA technology has few takers, EGoM felt that it may attract no bidders; hence it will recommend option of 50 percent price cut as well," said a source.
Meanwhile, Sibal said the EGoM has decided "to conduct auction in 900 MHz band in three metros - Delhi, Mumbai and Kolkata - where licences are due for renewal in 2014."
For 900 MHz, the quantum of spectrum that will be put up for auction is 15 MHz each in Delhi and Mumbai and 12.5 MHz in Kolkata, he added.
The Cabinet, on December 13, approved reserve price for 900 Mhz band in Delhi and Mumbai to be twice of revised reserve price for the 1800 MHz band. For Kolkata, it would be twice the price obtained in November auction of 1800 Mhz.
"In 1800 MHz band, quantum of spectrum put up for auction will be 15 MHz in Delhi and Mumbai, while for Karnataka and Rajasthan, it will be 10 MHz with topping up provision of 3.75 Mhz as in November 2012 auction," Sibal said.
The government had failed to sell CDMA spectrum at 1.3 times higher reserve price than that of GSM spectrum in 1800 Mhz band in auctions that concluded in November, 2012.
The pan-India reserve price for 5 Mhz of spectrum in 1800 Mhz band was fixed at Rs 14,000 crore.