The Union Cabinet has approved a 50% reduction in the reserve price of CDMA spectrum in the 800 MHz band, across all service areas.

In addition to this, the cabinet has also approved a empowered group of ministers (EGoM) recommendation to charge existing operators who currently hold spectrum in the 800 MHz band in regions where an auction determined price is unavailable, on the basis of the revised spectrum price from Jan 1, 2013, until an auction determined price is formulated. The cabinet stated that this payment will be adjusted against the actual due amount, once the auction determined price is fixed.

While the cabinet didn’t officially disclose any new reserve price, it had previously set a reserve price of Rs 18,200 crore for a block of 5MHz of spectrum in the 800MHz band, which was about 1.3 times the reserve price fixed for the GSM spectrum. As per our calculations, this reduction will translate the new reserve price to around Rs 9,100 crore for a block of 5 MHz of spectrum in the 800MHz band and Rs 1,820 crore per MHz of CDMA spectrum in the 800 MHz band.

Implications

This reduction will probably attract CDMA players in the country to participate in the upcoming 2G auctions. According to a The Economic Times report, GSM operators like Vodafone, Bharti Airtel and Idea Cellular are also looking to participate in the CDMA auction and have apparently told the government its intentions to participated in the spectrum sale of 800MHz band.

The Unsuccessful 2G Auction

This development follows a dud 2G spectrum auction in November, where none of the CDMA operators had participated in the auction. Tata Teleservices and Videocon Telecommunications had initially submitted a bid to seek CDMA licenses in the country, but both the operators withdrew its respective bids 10 days prior to the 2G auction. Sistema Shyam Teleservices (MTS India) had chosen not to participate in the auction, since it believed it was unfairly punished by the Supreme Court’s judgement in February.

2G Spectrum Allocation Timeline

Here’s a timeline of events following the Supreme Court Verdict in the 2G Spectrum Allocation Scam case:

– Feb 2, 2012: Supreme Court cancels 122 licenses of 22 operators and directed the Government to conduct fresh auctions for sale of the spectrum within a period of four months, asking the TRAI to come up with fresh recommendations.

– March 5, 2012: The Indian government files a review petition in the Supreme Court in response to the Court’s verdict in the 2G spectrum allocation case, asking the court to only review the part of the order where it had deemed the ‘ first-come-first-serve’ spectrum allocation policy of the government flawed.

– April 24, 2012: The TRAI comes out with recommendations on spectrum reserve price, and also proposes refarming in the 900MHz band, and liberalization of spectrum. Telcos express dismay as they feel the price is steep.

– April 24, 2012: The Supreme Court extends the deadline for the auction of 2G licenses which were cancelled by it, from June to 31st August 2012, and asks telcos whose licenses were cancelled to continue services till 7th September.

– July 5, 2012: The Department of  Telecom (DoT) posts a notice on its website announcing guidelines for the upcoming 2G spectrum auction,  including eligibility, amount of spectrum and number of blocks, however, it did not announce the minimum bidding price for the auction.

– July 24, 2012: Reports suggest that the Empowered Group of Ministers (EGoM), the minister panel responsible for finalizing rules for the upcoming 2G spectrum auction, has recommended a reserve price of Rs 14,111 crore and Rs 15,111 crore for a block of 5 MHz of spectrum in the 1800 MHz band on a pan-India basis.

– August 3, 2012: India’s Cabinet of Ministers sets 2G auction price.

– August 27, 2012: Supreme Court extends the 2G Auction Deadline from August 31, 2012 to Jan 11, 2013. The court also allows service providers whose licenses were cancelled to continue operations till 18th January 2013, extending the earlier deadline of 7th September 2012.

– November 5, 2012: Tata Teleservices and Videocon Telecommunications withdraw its respective bids for CDMA Spectrum, leaving no qualified bidders for the CDMA spectrum in the 2G spectrum auctions.

– November 15, 2012: The 2G auction concludes in just two days and the government ended up raising just Rs 9,407 crore with only five participants, of which only two were among those whose licenses had been canceled. It was also indicated that the Government was able to sell only 42.37% of the total spectrum that was put up for the 2G auction.

– November 26, 2012: Tata Teleservices (TTSL) announces shutdown of its operations in Jammu and Kashmir, North-East and the Assam regions from January 18, 2013.

– December 10, 2012: Sistema Shyam Teleservices (MTS India) sets a deadline to the Indian government to formulate a strategy to resolve its 2G license cancellation issue in the country. The company told Medianama that this was to ensure protection of over USD 3.2 billion investments made in Sistema Shyam Teleservices Ltd.

– December 10, 2012: Empowered group of ministers (EGoM) lowers the reserve price by 30% for the Delhi, Mumbai, Karnataka and Rajasthan circles in 1800 MHz band after these circles didn’t attract any bidders in the 2G auction due to high pricing. Following this reduction, the government had set a new reserve price of Rs 12,000 crore for a block of 5 MHz of spectrum in the 1800 MHz band on a pan-India basis.

– December 18, 2012: Telecom Regulatory Authority of India (TRAI) directs Tata Teleservices, Unitech Wireless, Videocon Telecommunications and Sistema Shyam Teleservices (SSTL) to inform the date of discontinuation of its services to all its subscribers in circles where the telcos has lost licenses to operate due to the Supreme Court Judgement.

– December 21, 2012: Reports suggested that the Department of Telecom is planning to auction about 24 blocks of spectrum in the next auction round, which includes 12 blocks of 1.25 MHz in the 1800 MHz spectrum band and 12 blocks of 1.25 MHz in the 900 MHz spectrum band. Telecom minister Kapil Sibal stated that the auction in the 1800MHz band and the 900MHz band will be held simultaneously.

January 15, 2013: Supreme Court had allowed telecom operators whose licenses were cancelled following the Court’s judgement in the 2G scam case, to continue operations till February 4, 2013 from the previous deadline of January 18, 2013. The court had apparently sought details on the reserve price being set for the March auction and fixed February 4, 2013 as the next date of hearing for the case.