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.
Q: You were talking about legal issues. To do with refarming, the government had a very strong opinion about it. Then it has decided to go ahead with partial refarming. You are talking about legal issues. Are you going to be seeking legal recourse in any form?
A: We will definitely be looking at that option. We have indicated that that will be on the table. We will wait to see what the final decision of the Cabinet is. If by chance it does get referred back to Telecom Regulatory Authority of India (TRAI), which we believe it ought to be, so we will wait to see what the final decision and process is.
Q: The GSM players also had requested the government as far as 800 MHz band goes. They wanted some of it from the CDMA players. We understand that that has not been accepted by the EGoM. What is your reaction on that front?
A: Disappointed. We thought that if there is no demand for the 800 MHz, by suggesting this we would create a demand in that upper band. The notion that the government should continue to sit on this and get no revenue from it, in our mind, is just mind-boggling. We just do not understand why.
Q: You are unimpressed by the EGoM decisions. You would have wanted to see a lower reserve price on the 800 MHz band. You said you are going to watch out for that legal recourse as far as partial refarming goes. Can you give me a timeline? What that legal recourse is going to be?
A: It is difficult to speculate on that particular issue right now. So, we will basically wait to see what the final decision is. Once we know the final issue as referred to us by the government, we will have to determine what the specifics are. At this point, it would be far too speculative.