2G auctions heading for flop; zero bidders for CDMA

New Delhi: The Code Division Multiple Access (CDMA) spectrum auction has flopped before it has begun, with both the interested parties pulling out of the race.

Last Friday, Videocon withdrew its application for 10 CDMA circles and by the 3 pm deadline today Tata Teleservices had also thumbed its nose at the government’s attempt to bridge its fiscal deficit by auctioning airwaves (spectrum) at sky high prices.

Sistema Shyam, the third potential applicant, had clarified earlier that it awaits a decision on its curative petition filed in the Supreme Court for restoration of cancelled licences and is not interested in participating in the upcoming auctions. Reliance Communications also decided to abstain.

By industry calculations, the no-show at the CDMA auctions may result in revenue loss of about Rs 6,500 crore to the government. A _Reuter_s story quoted an unnamed official of the Department of Telecom (DoT) as saying, “Now there is no bidder left for CDMA. We’ll have to take a call on what to do.”

Industry sources confirmed to Firstpost that Tata has pulled out, saying there was no business case for the three circles - Jammu & Kashmir, Assam and the North East - at current base prices for 800 Mhz auction. Tata had put in applications for these three circles because its licences were among the 122 cancelled by the Supreme Court this February. These sources said Tata had put in an application for CDMA circles since it was hopeful of its curative petition, pending with the Telecom Disputes Settlement Appellate Tribunal (TDSAT) being heard before today. This petition had challenged the decision of the government to cancel the three licences in the first place.

But another industry source said Tata Tele was never serious about bidding for these three circles since they are not very attractive in terms of revenue potential. Also, this source said Tata realised rather late in the day that other CDMA players such as Sistema Shyam have refrained from applying for any more CDMA spectrum.

The telecom ministry is scheduled to start auctions for airwaves from 12 November for GSM-based mobile services, which was to be followed by the CDMA airwaves auction.

With the total failure of CDMA auctions and the less-than-enthusiatic applications for GSM airwaves, telecom industry analysts have pointed out that based on earnest money deposits made by hopeful bidders till today, the government will generate less than half of the Rs 45,000 crore target from the entire auction process.

These calculations show that if all GSM hopefuls stay put in the auctions after today, revenue realised by the government may be around Rs 21,000 crore against the potential revenue (had all players bid for all possible slots) of Rs 34,400 crore. By the same calculation, CDMA revenue potential was Rs 13,650 crore, but this had been whittled down to Rs 6,500 crore.

Mahesh Uppal of Com First (India) warned that more GSM withdrawals may happen before the 2G auctions begin. He also agreed that the auctions are increasing “looking like a flop show”.

Meanwhile, the pullout by both Videocon and Tata may actually strengthen the point Sistema has made in its curative petition.