'2G auction stresses need for better govt, TRAI coordination'

Nomura says it is surprising that Reliance Industries did not participate in spectrum auction

Research firm Nomura said the tepid response to telecom spectrum auction is  another example which highlights the need of  the government and regulators (TRAI) to work more closely with the telecom operators to make any policy effective going forward.

What happens next isn’t entirely clear and whether these prices can be treated as market prices remains to be seen as demand has fallen short of supply and either the regulator will cut the reserve price and start again in some or all circle; or, potentially use these auction prices as a basis to derive the price for incremental circles, Nomura further said. It can also look at new alternatives altogether, firm said.

Fixing the spectrum price is critical as licence renewals will begin in next two years and more spectrum would be released be released for 4G, it said.

Sentiment for telecom share prices will improve as incremental cash outflows for the companies will likely be lower than initially expected. With expected voice price in near future which will drive earnings for all telecom companie, Nomura added.

Nomura further said that it is also surprised with that Mukesh Ambani’s Reliance Industries (RIL) didn’t participate in auction and it doesn’t rule out attempt from RIL to expand its 2G/3G presence.