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2G auction falls short of expectations

13 Nov 2012

After the first day of the 2G licence auction around half of the spectrum on offer remains unsold after seven rounds of bidding, with bids submitted so far totalling INR92 billion (USD1.677 billion): less than a quarter of the government’s target of INR400 billion. The Economic Times reports that there was no interest in the Delhi, Mumbai, Rajasthan or Karnataka circles, for which the base price for spectrum had been set the highest. An official from the Department of Telecommunications (DoT) noted that the government had received bids for ‘only 55% of the airwaves we had put up for sale’, adding that the auction failed to conclude yesterday, as bidding for the Bihar circle could not be completed before the 7.30pm cut-off point. Of the 176 blocks of spectrum on offer, bids had been entered for 98 blocks in 18 circles.

The director general of industry group the Cellular Operators’ Association of India (COAI) Rajan Matthews attributed the ‘muted’ response to the auction to insufficient spectrum and high reserve prices. The chairman of Bharti Airtel, India’s largest cellco by subscribers echoed the reaction, saying: ‘If you look at the 3G auction, it started with a reserve price INR3,500 crore [INR35 billion] and it went up to INR16,500 crore [INR165 billion]. That’s a wonderful model. But when you start with such a high reserve price like in this 2G auction, people start eliminating themselves out. So you don’t get to see any auction frenzy. People have clearly taken a position that this is not viable.’

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