In the last couple of years, Indian telecom sector has been affected by the ongoing policy paralysis and regulatory overhang. In February 2012, the Supreme Court of India cancelled 122 telecom licenses issued in 2008 when spectrum was allotted bundled with a license, allocated on a first-cum-first-serve basis. The Supreme Court’s order paved the way for auction-determined pricing for spectrum going forward. As directed by the Apex Court, TRAI came out with a base price for the available spectrum which was more than 10 times expensive than the price paid earlier by the operators. Subsequently the Empowered Group of Ministers lowered the reserve price by around 20%, which is still higher for the debt-ridden telecom operators struggling to bring their bottomline in green. The 2G auctions held during 12-14 November, 2012, witnessed a lukewarm response.
Following are the key highlights of the auctions:
Telewings’ was very selective in the bidding as it applied for only 6 circles from its earlier indication of 9 circles. Idea regained its cancelled spectrum in 7 circles and applied for one block in Bihar circle.
Videocon applied for spectrum in 6 circles, 4 of which lie in Category B, leading to lower cash outgo as compared to Telewings.
Results of Spectrum Auction (Nov. 2012)
2G Auction Paves the way for Consolidation The higher reserve price of Rs. 140 billion for 5 MHz spectrum compared to Rs. 16.5 billion paid by the operators in 2008 proved to be an inhibitor, attracting far lower number of bids than expected. Out of the 8 telecom operators whose licenses were cancelled by the apex court, Etisalat and S-Tel decided to shut their shops in India whereas only Telenor (under the new name ‘Telewings’), Videocon and Idea decided to participate in the auction. Tata Teleservices, Loop Telecom and Sistema refrained from the auction process. Also, the new participants Telewings and Videocon limited their bids to 6 circles each, none of which was in Metro circles.