-- Ministerial panel suggests up to 50% cut in base price
-- Federal cabinet to decide on auction base price
-- Next round of bandwidth auctions in March
(Adds comments from telecom minister, details)
By Rumman Ahmed
NEW DELHI--A panel of Indian ministers Monday suggested cutting
by up to half the base price for an auction of bandwidth to provide
telecom services using the code division multiple access
technology, after the government failed to find any bidders at an
earlier sale.
The panel, headed by Finance Minister P. Chidambaram, has
recommended the federal cabinet cut the price by "either 30% or
50%," a senior government official told reporters.
The suggestion comes after India's failed attempt in November to
auction airwaves in the 800-megahertz frequency band, used by
companies providing CDMA-based services.
The government had set the base price for that auction at about
182 billion rupees ($3.3 billion) for a 5-megahertz slot. Telecom
companies termed the price too high and abstained from the auction,
forcing the government to scrap it.
Demand at another auction in November to sell bandwidth for
telecom services using the global system for mobile communications
technology was tepid, with the government raising about a third of
the targeted 280 billion rupees.
Revenue from bandwidth auctions is key to the government's
efforts to keep its budget deficit within its target of 5.3% of
gross domestic product this fiscal year through March. New Delhi
was initially expecting 400 billion rupees in revenue by selling
telecom spectrum this year.
The weak response in the first round led the federal cabinet to
approve a second round of auction. It has also already cleared a
30% cut in the base price for auctioning GSM bandwidth to improve
participation in the next round.
The second round of bandwidth auctions will be held in March and
it will cover both GSM and CDMA, said Telecom Minister Kapil Sibal,
who is part of the panel.
Auctions for bandwidth in the 1800 MHz and 900 MHz frequencies,
which are used by GSM operators, will begin on March 11, said the
government official, who asked not to be named. Auction of the 800
MHz frequency for CDMA services will happen subsequently, he
added.
India is auctioning the airwaves following an order from the
Supreme Court, which in February last year canceled the telecom
licenses of several companies citing irregularities in their
allotment in 2008. It asked the government to take back the
airwaves allocated under the canceled licenses and auction
them.
The court allowed the companies affected by the order to
continue providing services until Jan. 18 under their canceled
licenses, and ordered the government to complete the auction and
allotment of bandwidth by then.
The government will file an application with the Supreme Court
seeking an extension of the Jan. 18 deadline, the official
said.
CDMA spectrum is crucial for companies like Russia's Sistema
JSFC (AFKS.RS), which had lost 21 licenses under the court
order.
Sistema had said that it would not participate in the auction as
it was awaiting the outcome of its plea in the Supreme Court
regarding the cancellation of the company's permits.
Another foreign company affected by the court order--Telenor ASA
(TEL.OS) of Norway--got bandwidth in six service areas through the
November auction of GSM bandwidth.
Write to Rumman Ahmed at rumman.ahmed@dowjones.com
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