Sistema Shyam, subsidiary of Russian conglomerate Sistema, is the only applicant for India’s spectrum auctions, scheduled for March 2013, applying for spectrum in the 800 MHz band. There are no applications for spectrum in the 1800 and 900 MHz band, according to a notice released by India’s Department of Telecom.

Sistema has 10 MHz spectrum in the 800 MHz band in Rajasthan, and has applied for 5MHz in 22 circles, where its licenses were quashed following the landmark Supreme Court judgment last year, which led to cancellation of licenses controversially allocated under Telecom Minister A. Raja’s regime in September 2008. Sistema, which operates under the MTS brand in India, has wound down its operations in 10 of the 22 telecom circles in the country, including Assam, Andhra Pradesh, Bihar, Himachal Pradesh, Haryana, Jammu & Kashmir, Madhya Pradesh, North East, Orissa and Punjab.

No Takers For 900MHz and 1800 MHz

Compare the lack of participation in these auctions with the mad scramble that took place during the 3G auctions: the message from telecom operators is clear – they’re not willing to pay inordinately high prices like they did for 3G, and according to this Bloomberg report, they don’t want a reserve price for spectrum. Even in the auctions that took place in November – and ended in just two days – most telecom operators did not apply for spectrum, and spectrum in the premium, and previously sought-after Delhi and Mumbai circles went unclaimed.

Also note that there are no applicants for 1800MHz and 900MHz, despite a Supreme Court order last month which led to Telenor owned Uninor to shut operations in Mumbai, after exiting Kolkata and West Bengal.

The Indian government has been using spectrum auctions as a means of addressing the rather high fiscal deficit, and the environment for investment in telecom in India appears to be so bleak that even with current telco’s not participating, no external telecom operator is willing to take a punt. Etisalat and Batelco are two telco’s that exited the Indian market following the Supreme Court order, writing off their ill-fated investments.

So what should the Indian Government do? In our opinion, let competitive forces define the price of spectrum, but use regulation to prevent cartelization: Telecom and Internet are key infrastructure, and the cheaper the spectrum and higher the competition, the better it is for consumers and India’s digital economy.

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.

– January 18, 2013: Union Cabinet had approved a 50% Reduction in 2G reserve prices for CDMA spectrum.

– January 24, 2013: DoT had issued guidelines for 2G Spectrum Auction in March 2013.

– February 19, 2013: Uninor Shuts In Mumbai; CDMA Okay; License Situation

– Feb 21, 2013: Vodafone & Airtel Challenge Auction Plans

– Feb 22, 2013: MTS India To Close Down Operations In 10 Circles