The 2G auction saw no bids for spectrum in four telecom circles – Delhi, Mumbai, Rajasthan and Karnataka, mainly on account of the high base price. The government had set a bid starting price of Rs 14,000 crore for 5 megahertz of 2G airwave space on offer in all 22 zones. The base price was seven times more than what the carriers had paid in 2008.
“In hindsight, it is clear the reserve price for 2G auctions was too high,” Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, had said last week at an event on Indo-Japanese trade relations.
The EGoM is now likely to discuss if there is a need to lower the base price, the sources said. It will also deliberate a new reserve price for CDMA (code division multiple access) spectrum, the auction for which had to be cancelled after after both bidders – Videocon and Tata Teleservices - pulled out.
Top telecom operators Bharti Airtel, Vodafone and Idea Cellular had demanded allocation of a part of CDMA spectrum in the 800 Mhz band for GSM services in a letter to the Department of Telecommunication last week.
"We recommend that the 800 MHz spectrum band is harmonized with the international band plan to become part of an ‘extended’ 900 MHz band. This will increase the availability of spectrum in the 900 MHz band by up to 10 MHz (or over 40 per cent)," the letter stated.
At present, airwaves frequencies in the 900 Mhz band are used to transmit signals for GSM mobile services. The government had fixed the price of 800 Mhz spectrum 1.3 times higher than that for the 1800 Mhz band auctioned off in November.
Kapil Sibal, Minister for telecommunications and IT, had earlier said that the unsold airwaves would be re-auctioned later. Last week, Finance Minister P Chidambaram had said that the government will go for a second and, if necessary, a third auction to reach the target of Rs 40,000 crore. It managed to raise Rs 9,407.64 crore, less than one quarter of the target, from the auction.
In February this year, the Supreme Court had cancelled all 122 licences granted to eight carriers in 2008 by then telecom minister A Raja, the main accused in the 2G scam. It had then ordered that 2G spectrum be auctioned, setting a deadline for the process.
The muted response this time - in contrast to a 2010 sale of 3G airwaves that raised more than $12 billion - cast uncertainty on another spectrum auction plan for next year and a planned surcharge on existing airwaves.
While India's more than 900 million mobile phone customers make it the world's second-biggest market after China, intense competition among 15 carriers means wafer-thin margins. Competition will shrink from January, leaving seven players with a nationwide presence.
With inputs from PTI, Reuters