Poor show continues on second day of 2G auction

Govt manages to mop up a mere Rs 9,400 cr, only 101 of 176 blocks sold

The much-awaited 1800 Mhz 2G spectrum auction ended in the second day today with the government managing to rustle up a dismal Rs 9,400 crore.  

At the end of the fourteenth round of bidding, the final revenue collected by the Government ihas gone up by less than  2 per cent from the first day of bidding as only 101 of the 176 blocks of 1.25 Mhz of spectrum could be sold.

While Telenor got spectrum in six circles which include Andhra Pradesh,  Maharasthra, Gujarat, UP east and west  and Bihar,  Videcon and Idea won  in seven circles , while Vodafone and  Bharti  just put in their token presence in only one circle. Idea has won in Tamil Nadu, West Bengal, Kolkatta, Orissa, north east, Assam and Jammu and Kashmir.  Based on this numbers only 20 per cent of the total value of the spectrum (GSM and CDMA) at base price of  Rs 48,000 crore was sold.    

It is clear that Government’s ambitious target to get Rs 30,000 crore from auction and one time fee will go completely awry.  For one, with the operators having to pay only one third of the spectrum up front they will need to fork out only Rs 2820 crore this financial year.

However the amount could be lower as the  government under the auction terms had agreed  to  adjust the 2G licence fee which operators whose licences has been cancelled  due to the Supreme court order have paid with what they fork out in the forthcoming auction, provided they don’t have any criminal charges . Based on this clause it might have to adjust Rs 3500 crore of license fee paid by Telewings (earlier Uninor), Videocon and Idea Cellular (in seven circles).  Based on that premise it would be  less than Rs 2000 crore this financial year .  

Together with one time fee (out  of  which 11,000 crore of MTNL and BSNL has to be funded by the Government)  the government will not be able to rustle up more than Rs 8,000 to 10,000 crore this financial year, nearly a third of their target .    

 Says a  promoter of a leading telecom operator: “The government has said it will refund the licence fee of all telcos whose licence has been cancelled. That would amount to Rs 10,000 crore. While thry will earn less than that.  So they could be in a deficit this year”.  

What the government has been able to rustle up is virtually the same that disgraced Communications minister A Raja got by giving nine new licences in 2008 for over Rs 10,000 crore.  It is also pretty clear that the values of the spectrum is nowhere near what the Comptroller &  Auditor General of India had imputed which lead to its conclusion that the Government had made a notional loss of Rs 176,000 crore.      

Five telcos — Bharti Airtel, Vodafone, Telenor-promoted Telewings, Videocon and Idea Cellular had participated in the bids today.

What muted the entire auction was that there were not takers in  the three big circles- Delhi, Mumbai and Karnataka which constituted for over 48 per cent of the total base price in the second day  which is a key reason for the lackluster auction.