2G auction: High price blamed for muted response

Holding high reserve price responsible for the muted response to the 2G telecom spectrum auction , Cellular Operators Association of India (COAI) on Monday said it would be surprising if the process went on for more than a day or two.

"The limited amount of spectrum, contrary in our opinion to the Supreme Court ruling, was guaranteed to have a very detrimental impact on the auction. We said the high reserve price would ensure that limited players come into the bid, indicated extremely muted bidding and that there would be several circles that would have no bidders," COAI General Secretary RS Mathews said.

That is exactly what we are seeing now, he said, adding that "he would be surprised if it would go on more more than a day or two".

The government on Monday received bids worth more than Rs 9,200 crore on the opening day of an auction of 2G mobile phone spectrum, drawing scant interest.

Of the 22 telecom circles, in which India has been divided, bids were received for 18 circles, with Delhi, Mumbai, Rajasthan and Karnataka, which had the highest base price, drawing blank.

Sources said the auction has drawn scant interest so far as the base price for 5 MHz of GSM radiowaves or spectrum in all the 22 zones is more than seven times of what the companies paid in 2008.

Sunil Bharti Mittal, Chairman of Bharti Airtel, the nation's largest telecom company, had last week predicted that the auction would be over on first day itself because of the high base price.

"There is a pervading sense of gloom. There is everybody who invests in India is open to attack...No one wants to invest in India, there is uncertainty," noted jurist Harish Salve said.

The bids received so far are a far cry from the Rs 28,000 crore minimum revenue that the government is expecting from the auction of wireless spectrum reclaimed after the Supreme Court cancelled 122 permits issued in 2008.

The government had set a bid starting price of Rs 14,000 crore for 5 megahertz of GSM airwave space in all of India's 22 telecommunications zones. The base price was more than seven times what carriers paid in 2008.

Bharti Airtel, Vodafone, Idea Cellular, Norway's Telenor and Videocon are bidding for GSM, but there are no bidders for the CDMA spectrum after Tata Teleservcies and Videocon pulled out of the race.