India's 2G auction a bust

Dylan Bushell-Embling
15 Nov 2012

India's 2G auctions closed yesterday after raising just 94.07 billion rupees ($1.7 billion) - less than a quarter of the revenue the Indian government had expected.

The only five participants in the auction submitted no bids at all for licenses in major telecom circles Delhi, Mumbai, Karnataka or Rajasthan, India's Economic Times reported. Together, these circles represented 50% of the total reserve price of the auction.

All told, the telecom ministry sold just 42.4% of the 1,800-MHz spectrum put up for sale.

Indian GSM operator body COAI has reiterated its assertion that the lacklustre response of the auction was due to the artificially high reserve prices.

Norway's Telenor, through new JV Telewings, and Videocon each won back 2G licenses in six circles following the cancellation of all their operating licenses earlier in the year.

Telenor was the biggest spender, bidding 40.18 billion rupees, while Videocon will pay 22.22 billion rupees.

Idea Cellular won back the permits it lost in seven circles, as well as a block of spectrum in an additional region, for a bid of 20.3 billion rupees.

Vodafone India meanwhile pay 11.29 billion rupees for 1.25-MHz of additional spectrum in 14 circles. Finally, incumbent Bharti Airtel bid a mere 86.7 million rupees for additional spectrum in just one circle.

India's telecom secretary told the Economic Times that the government is now going to have to decide what to do with the unsold spectrum, including re-running an auction at a lower reserve price.

Far from being a boom to the government's coffers as expected, the auction may result in the opposite. After paying refunds, compensation and possible arbitration penalties to operators affected by the cancellation of the earlier licenses, the auction could lead to a net loss.

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