India may yield on 2G auction pricing

Dylan Bushell-Embling
13 Jun 2012

Indian lawmakers have made a series of tweaks to plans to re-auction 2G spectrum in the wake of a court decision to nullify the 2008 allocation – tweaks which may make life easier for the nation's newer operators.

The Empowered Group of Ministers (EGoM) charged with making the final decision on the auction terms has quietly changed the parameters of the auction from just maximizing revenue to the government, to “maximizing revenue but within certain parameters,” Business Standardreported.

This could be an indication that lawmakers are listening to the industry's strong objections to proposals to price 2G spectrum at up to 13 times more than the base price for which the spectrum was allocated in 2008.

Operators and industry groups have warned that such high rates would lead to higher retail prices, as cellcos would have no choice but to pass on the cost burden to their customers.

Some companies facing the cancellation of their only operating licenses in India, following the court's decision to revoke the 122 2G licenses allocated in 2008, have also threatened to exit the market altogether over the proposed prices.

Another point of contention among the eight operators affected by the license cancellation is the draft plan to allow established operators to bid as well. With only 10MHz likely to be up for auction initially, they face the prospect of being squeezed out of reacquiring spectrum.

But a panel within India's finance ministry has now decided to allow existing operators to bid for only one 1.25MHz block per circle, with new entrants or those having their licenses revoked able to bid for two or three of these blocks, Press Trust of Indiareported.

Finally, the Reserve Bank of India has approved a proposal to allow operators to put up spectrum as collateral in loans to pay for the auction, according to the Economic Times. Operators had reportedly been anticipating trouble securing loans for the auction, partly because of the high costs likely to be involved.

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