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Dec 07, 2012, 10.24 PM IST | Source: CNBC-TV18

30% reserve price cut won't create much interest: COAI

Rajan Mathews, directorate-general (DG), Cellular Operators Association of India (COAI) says any reduction in the reserve price is a welcome move. However, a 30 percent reduction, he says, is not something that is going to generate a whole lot of additional interest.

Set a realistic reserve price and let the auction process and dynamics determine the final value that the market places on that spectrum.

Rajan Mathews

DG

COAI

After the failure of the 2G auctions, sources tell CNBC-TV18 the government has decided to lower the reserve price for 2G spectrum . Sources say the reserve price has been cut by 30 percent in four circles.

In an interview to CNBC-TV18, Rajan Mathews, directorate-general (DG), Cellular Operators Association of India (COAI) says any reduction in the reserve price is a welcome move.

However, a 30 percent reduction, he says, is not something that is going to generate a whole lot of additional interest.

Below is the edited transcript of his interview on CNBC-TV18.

Q: Telecom Minister Kapil Sibal is saying they have decided on a reserve price. According to source based information, in the four unsold circles, it is going to be 30 percent lower. Do you think that is enough to bring back players to get an interest back in these circles?

A: Any reduction in the reserve price is a welcome move. However, a 30 percent reduction, in my opinion, is not something that is going to generate a whole lot of additional interest. So, I really do not think, especially in the key circles of Delhi and Mumbai, that you are going to see seeing significant new interest generated by a mere 30 percent reduction.

Q: Obviously lower the better would have been good for you. But realistically speaking, at what level, do you think the government should have set the reserve price so that it would have been a competitive auction?

A: First of all, we need to rationalise what one means by a reserve price. This has been the conundrum all along. Set a realistic reserve price and let the auction process and dynamics determine the final value that the market places on that spectrum. So, we keep falling into this trap of setting a reserve price, which people believe ought to be near the realised price. So, in our expectations, you should start at about 20 percent of what this reserve price is being set at and let the market dynamics determine as to how high that will go.

Q: We understand from our sources that 900 MHz is still going to be two times the price of 1800 MHz. What is your reaction on that front?

A: It is absolutely way out of the ballpark. You are talking about Mumbai, for example 5 MHz of spectrum, at that price, would be asked to shell out Rs 3,800 crore. Trying to make a business case, at those levels, is totally unrealistic.

Secondly, as we have indicated there is a real legal issue in terms of this notion of taking back spectrum and refarming it. That matter will also have to be resolved. The ratio, which is being applied, the 1.5 or two times ratio amount, which is being put on, is in our expectation quite in question, especially given that 800 MHz had not been auctioned at all.

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