Participation in 2G auction along predictable line: Experts

Telecom operators like Bharti Airtel, Vodafone, Idea, Tata Teleservices and Telenor  today submitted application for participating in the 2G spectrum auction. Gopal Jain, Senior Advocate feels the companies who have applied for auction are along predictable lines. He feels the 2G auction is unlikely to move up to the benchmark of 3G auction.

Independent Analyst, Kunal Bajaj also agreed with Jain and believes the names of players who have agreed to bid were already anticipated. Here is the edited transcript of the interview on CNBC-TV18. Q: The line is pretty predictable, the surprise really from Sistema and Reliance Industries, your first thoughts on that? Jain: It is pretty much along predictable line. In this overall uncertainty which we have and high prices, we don't have a finalized unified licence and policy is yet to be fully formulated. Taking into consideration the one time fee issue, potential refarming issue, I think this is pretty much along predictable lines. Q: Purely from a legal perspective and since you are involved in some of the cases, half of the companies participating are existing players who perhaps by some accounts don’t necessarily need huge amount of GSM spectrum. They only need top up slots. I am talking about Bharti, Vodafone and Idea. There is a question mark about Tata Tele given what has happened in the Supreme Court where you were represented yesterday. Given this line up and unless it changes with some more information trickling in, do you expect that the auction will see a lot of intense bidding or because of this line up you see that it will be mostly a damn auction? Jain: Personally, I don't think it is going to see the same kind of intensity as the 3G spectrum auction did which is considered as a benchmark. People's expectations are also built around it. I think as you rightly said this time people will be more cautious, more circumspect for additional spectrum.
I call it a circle wise bidding strategy whereas earlier people would go and would become a pan India player and get spectrum across India. I think it will be a different kind of an auction this time. Q: From a legal perspective, Sistema staying away, is this sort of an indication with regard to possible dispute between these two governments on the fate of Sistema now escalating because clearly Sistema has fore closed the voluntary option of participating in the auction and CDMA spectrum that it has as of now therefore completely gone? Jain: By not participating in the auction they have ruled out that possibility. I believe they have filed a curative petition in the Supreme Court and then there is a government to government. Probably, they put their expectation out of those two areas rather than participating again because once bitten twice shy. Maybe they are trying to salvage and recover lost ground through those two routes which I just outlined.
_PAGEBREAK_ Q: Whenever the curative petition comes up, could a court of law take the stance that by ruling out a voluntary participation Sistema has essentially foreclosed even the possibility of legal relief. In some ways, if you decide to step out of the queue you cannot therefore go ahead and later on claim that you had the right to participate in whatever was a the end of the queue. Jain: I think there are two sides to it that makes a lot of sense. Usually two things happen – sometimes court does something like mould the relief. In a particular situation they mould the relief, make it to a particular situation but in this case as you said even assuming if you were to succeed in the legal outcome it would be very difficult to say, let me have that licence and the same spectrum which I lost because maybe that spectrum was already put in the auction. There is a huge risk that you have taken by not voluntarily participating in this because even if you win legally it may not restore you to that position that you were as of January 10, 2008. Q: Three existing participants, three others including two whose licenses have been quashed Videocon and Telenor as well as Tata Tele Services, what does the shape of auctions look like at this point of time? Bajaj: I believe that everyone who was expected to participate is participating. The only question mark remains whether RIL is going to participate through a partnership but naturally with someone like Videocon or someone else. The fact that they are not coming independently is a bit surprising because one would have expected that they would want to take part in auction whether they would look for pan India license or licenses in specific circle.
One would have expected participation from them. This is certainly going to be a much more cautious auction in terms of the way the operators approach it, particularly because they also know that the benchmark price that gets set for this auction is going to have impact on the payments that they have to make proactively going forward as well as for the 900 Mhz auctions that will eventually happen as well. Q: Let me come to you on the issue of Sistema. MTS as the brand is know in India not bidding. Their executives were standing at DoT. But last moment decision apparently and they have not filed. The question really is given that MTS Sistema is not participating, it is clear at this stage at least that the CDMA spectrum that will be put up for auction has no takers. Essentially, it is just a pure play GSM auction? Bajaj: It seems to be that way. That’s what is happening here. I think Sistema is expecting that through the legal recourse and the battle that they are fighting, they are still hoping to get something through that route. It’s a bit surprising that they haven’t taken this at least as a backup option.
With the future of CDMA technology in India, I think it is too early to say that it is gone in terms of its future growth because we will still have somebody, the existing players pushing on that. But you are right it is a bit surprising to see this.