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Oct 19, 2012, 10.48 PM IST
Bharat Bhargava ,telecom practice partner, E&Y explains to CNBC-TV18 that the response to the 2G auction has been muted and adds that it is vital for operators rolling out LTE to have 2G and 3G support.
I can only see six or seven circles where demand will exceed supply
Bharat Bhargava, telecom practice partner, E&Y explains to CNBC-TV18 that the response to the 2G auction has been muted and adds that it is vital for operators rolling out LTE to have 2G and 3G support.
Below is an edited transcript of analysis on CNBC-TV18.
Q: How do you read Sistema and Reliance Industries deciding to stay away from the 2G auction?
Bhargava: In the case of Sistema, it is clearly one of three things. One, is that they expect the verdict will go in their favour, two, they might believe is that it is best to partner or acquire somebody, and third is that they don’t wish to be in India. So, it has to be one of these three things. We will just have to wait to see what happens.
Q: How about the possible Videocon-Reliance tieup?
Bhargava: It is very difficult to see how an operator rolling out LTE without any 3G or 2G support can make a success of it. Though, it is not a necessity, it will help to have 2G and 3G for coverage as well as for voice. Whether Reliance chooses to partner with Videocon or look at somebody else, it will be difficult for them not to have 2G and 3G.
Q: No new foreign players are actually expressing any interest in the auction process. It is the same six telecom companies expressing their interest along expected lines. Would you say that this has been a bit of a damp squib?
Bhargava: If you look at the operators who have submitted their applications, the existing operators are doing it for operational reasons as they have capacity constraints across several circles and that's where they are probably going to acquire spectrum.
There will be six or seven circles where demand might exceed supply of slots. So, the price may exceed the reserve price, but other than that, I can't see prices going above the reserve price.
Q: Given the context of the regulatory overhang on refarming, the one-time excess spectrum fee and now the possibility of having to perhaps not very aggressively bid in the 2G auction, do you believe that the government will be able to get to that Rs 40,000 crore target?
Bhargava: I don't think so. I can only see six or seven circles where demand will exceed supply. At most of the other circles, there will be excess supply of spectrum. So, I can't see that target being met.
Q: The COAI and the media have constantly submitted to the government that the reserve price was too high. How do you read that?
Bhargava: The reserve price clearly is very high. The case for business is difficult. The exiting operators need the spectrum, they have no choice and therefore they will bid, again selectively. New entrants have very little chance at this reserve price.
Q: So, overall you would say that this is a bit of a damp squib?
Bhargava: Those are your words, not mine.
Q: So, what would you say then? What would your opinion be?
Bhargava: I would say that the response is muted.
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