Moneycontrol
Dec 08, 2012 03:44 PM IST | Source: CNBC-TV18

EGoM decides to cut base reserve price by 30% in 4 circles

After the 2G auction turned out to be a failure, the government has decided to cut spectrum reserve price by 30% in four circles. The Empowered group of Ministers (EGoM) met today as Telecom Minister Kapil Sibal laid out the auction roadmap, reports CNBC-TV18's Siddarth Zarabi.


After the 2G auction turned out to be a failure, the government has decided to cut spectrum reserve price by 30% in four circles. The Empowered group of Ministers (EGoM) met today as Telecom Minister Kapil Sibal laid out the auction roadmap, reports CNBC-TV18's Siddarth Zarabi.


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


He said that the ministry will conduct fresh auctions in four circles for 1800 mhz band. These include Mumbai, Delhi, Karnataka and Rajasthan. Sibal also informed that three circles (Mumbai, Kolkata and Delhi) will see auction for 900 mhz band.


From nearly Rs 700 crore, reserve price in Delhi circle will now cost around Rs 483 crore. The Mumbai circle will now cost around Rs 475 crore rupees for the 1800 mhz spectrum.


Here are the key takeaways of the EGoM.


The EGoM has decided to cut  reserve price by 30 percent, in four important circles Bombay, Delhi, Karnataka, Rajasthan for the 1800 mhz band. However, the final call will be taken by the cabinet.


The next point is that the reserve price for the 900 mhz band with respect to refarming, the EGoM has upheld the TRAI's recommendation for that to be twice that of the 1800 Mhz band. The cellular operators wanted that to be same as the 1800 Mhz band. Refarming will start in December 14 in three crucial circles – Delhi, Mumbai and Kolkata. It would essentially mean a clear impact for companies like Bharti, Idea and Vodafone because they are the three dominant players in these three circles.


The EGoM has decided to conduct an auction once again in March 2013 which would mean after the budget, but within the current financial year. This is for both the 1800mhz and the 900 mhz band frequencies.


As far as the 800 Mhz band (popularly referred to as CDMA) is concerned, GSM operators had demanded this spectrum should be taken away from the CDMA operators. This demand did not see any favourable reflection within the EGoM. The CDMA spectrum that was on offer in the recent auction did not find any takers. The final decision will be taken once formal reference is made by the DoT to the TRAI to decide the new reserve price for the CDMA frequency.


What will be pricing of 800 Mhz band?


The TRAI will now hopefully give a final recommendation on the new reserve price for 800 mhz band. The in principle view of the EGoM is that it has to be below the 1800 mhz price. There are two levels of 1800 mhz pricing. The circles where already auction was concluded and a new price being discovered have been sold at a reserve price which was now being brought down for only four circles. So, therefore if we were to apply the same logic we could safely say that the CDMA price will be at two levels just like we now have two different reserve prices in the 1800 mhz band.

This matter will now be deliberated upon by the TRAI and its expectations will be out in January  for the EGoM to consider this. According to sources, auction for the CDMA frequencies is likely to happen sometime in the next fiscal.

 

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