2G auctions: Does the govt have answers to these questions?

There could be all-round confusion now in the telecom sector, with 2G spectrum auctions generating less than a fourth of the Government’s original revenue target and many circles not witnessing any bidding at all.

Not only has the Government been left with just about 25 percent of the revenue target at Rs 9200 crore (till the end of the fifth round of bidding today), it now has to deal with multiple issues which this auction has thrown up. Till the end of the fifth round of bidding today, only 55 percent of auctioned spectrum blocks had received bids. Total spectrum blocks up for auction are 176.

[caption id=“attachment_523155” align=“alignleft” width=“380”]  Will it lower the base price in these circles, hold another bid? Reuters[/caption]

Some questions today’s auction has thrown up:

1: How will the Government now determine at what price to charge the one-time fee for excess spectrum in circles like Delhi, Mumbai, Karnataka? The plan was to use the market discovered price from the 2G auctions to charge incumbent telcos for excess spectrum they hold. Now that there is no market discovered price, what does the Government do? Will it lower the base price in these circles, hold another bid?

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2: Will telcos move the courts challenging the auction process itself since the Supreme Court is already hearing a case on why all the available spectrum was not put up for auction? Telcos who win the circles of their choice in today’s auctions could consider challenging the reserve price in case there is a new calculation for those circles where there have been no bids

3: How will Government bridge further gap which will emerge when its Rs 31,000 crore revenue generation target from one-time charge does not materialise?

Perhaps Telecom Minister Kapil Sibal will have to search for answers for both, GSM and CDMA spectrum issues, since the same story has played out in the CDMA space earlier, where auctions had to be scrapped since the two interested bidders pulled out at the last moment.

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Are we really looking at a reduction in the GSM airwaves’ reserve price then? And consequently a reduction in that for CDMA as well? This remains to be seen.

Listed below are the circles in which bids were made.