EGoM may lower spectrum auction prices for Rajasthan, Karnataka, Mumbai and Delhi telecom circles

Telecom Lead India: The Empowered Group of Ministers (EGoM) will look into lowering the prices in Rajasthan, Karnataka, Mumbai and Delhi, which did not find any takers in the 2G auction held on November 12 and 14.

In August this year, the EGoM decided on a base price of Rs. 14,000 crore. The price was reportedly pushed for by Telecom Minister Kapil Sibal, while other members of the Cabinet were open to a higher amount.

Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said the Rs 14,000 crore reserve price in the auction of 2G spectrum was too high. He was speaking at an event on Indo-Japanese trade relations.

According to Ahluwalia, a healthy auction is key to price discovery. However, in the hindsight, it is clear that the reserve price was too high. He is confident the government can opt for re-auction and discover the price afresh.

“The Supreme Court has clearly indicated that (an) auction is not necessarily the only option…if Kapil Sibal proposes an alternative to auction, we’ll consider it on merit,” Ahluwalia added.

After the 2G auction flopped, India’s telecom minister last week emphasized that policy must remain the prerogative of the government, and that an environment of sensationalism is to blame for the poor response by telecoms to the auction.

In the auction, the government raised about Rs 9,400 crore, one fourth of its target of Rs 40,000.

Less than 60 per cent of the airwaves on offer found takers because carriers found the auction too pricey – the reserve price was seven times higher than what companies paid in 2008.

The government is yet to respond to telecom industry’s doubts about the protection of investment in India. recently suggested that the Government should refund Capex spent of around $6.5 billion to Videocon, Uninor, S Tel, Etisalat, Loop, MTS and Tata Teleservices (TTSL).

The refund of their investment in telecom network is important as the government is currently planning to refund spectrum fee paid in 2008 to companies who have won in the 2012 auction. What about other mobile operators and their investments in India.

The Videocon and Uninor brands will disappear from a part of the Indian telecom market after the flopped 2G auction that generated Rs 9,400 crore for the Government against the Rs 40,000 crore target.

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