Less than a week after Videocon Industries submitted the Rs 220 crore earnest money deposit to apply for 10 circles in the Code Division Multiple Access (CDMA) spectrum auctions, it has withdrawn its application.
Multiple industry sources confirmed this move, saying Videocon has already submitted papers to the Department of Telecom (DoT) saying it is no longer interested in bidding for the 800 mhz spectrum auctions. The last date for withdrawing applications is 5 November.
A source told Firstpost that Videocon had submitted an application and the Rs 220 crore EMD under the impression that other telcos would also show interest in the CDMA space.
“There was wide expectation of Sistema Shyam putting in an application for CDMA, but that did not happen. Videocon thought it best to apply for spectrum in case more bidders come forward but it was never really interested in the CDMA business,” the source said.
Another source had said earlier that if Videocon were to withdraw its application, it would strengthen Sistema’s case against the Government. The Russian telco has been arguing against cancellation of its licenses after the Supreme Court ordered in February, 2012 that 122 telecom licenses awarded by former telecom minister A Raja be cancelled.
Sistema’s stand had been consistent: when there was no one in front of the queue or behind us for the CDMA spectrum, where is the question of any violation of the first come first served policy followed by Raja? It has been pleading for re-allocation of licenses and its curative petition on the subject is pending. So Videocon’s withdrawl from the impending CDMA auctions again creates the same situation: Tata Teleservices is the only company now which remains in the fray for three circles.
Yet another source said Videocon would now offer LTE (4G) services through the GSM spectrum where its application stands. But with the
quick about-turn Videocon has done on the CDMA auctions, there is
really nothing certain about whether it will continue with the GSM
bids at this point.
For long CDMA industry has been panned in India for its myriad problems such as poor connectivity, issues with international roaming and lower revenues. This, despite 800 mhz spectrum band being far more efficient than the more popular 1800 mhz band which is currently being used for providing 2G services.
One of the sources quoted earlier said apart from Videocon, one of the oldest telcos is also expected to withdraw its application early next week for GSM spectrum. “This auction is going to be a no show. At such high prices, why should telcos spend more to acquire spectrum?” the source wondered.
Coming back to Videocon, there has been intense speculation that Videocon may be a front for Reliance Industries, the sole player with pan-India spectrum to offer 4G services. Last month, Firstpost had quoted a report by brokerage firm IDFC to say Videocon’s 2G bid was surprising. This report has pegged the company’s final outgo for at more than Rs 20,000 crore, depending on the circles it
bids for (both GSM and CDMA).
But this estimate was based on the earlier data when Videocon had applied for licences in 17 circles for 1800Mhz and 10 circles for 800Mhz band. Now, the outgo may be much lower. One of the sources quoted above said that Videocon will probably finally put in bids in the GSM space also cautiously.
“They will put in only as many bids in GSM where they get back the Rs 1,658 crore they earlier paid as license fee and which the government has said will be adjusted against the amounts submitted for the upcoming auctions”.
The IDFC report quoted earlier had said that “Videocon Industries has a net worth of Rs 9,700 crore (March 2012). Clearly, an investment of two times the net worth in a maturing industry (where others have struggled to build a profitable business at 1/10th the cost) looks optimistic.”
So Videocon’s selective and cautious bidding may perhaps be more in line with its resource kitty finally.
In its note, IDFC had said it does not rule out the possibility of Reliance Industries supporting Videocon’s bid. Videocon promoter Venugopal Dhoot has already referred to a “cordial relationship” between the two groups and the fact that Videocon has taken advice from Mukesh Ambani on bidding for 2G auctions.
Also, HFCL, the current partner of Reliance Infotel in BWA operations, was associated with Videocon Group in the past.