2G Auctions: Some light at the end of the tunnel?

On January 10, 2008, telecom companies were given just a few hours to provide their Letters of Intent and cheques during the 2G spectrum auctions. However, those allegedly tipped off by former telecom minister A Raja were waiting with their cheques and other documents.

The first-come-first-served policy was manipulated by Raja and 2G licences were issued to private telecom players at throwaway prices in 2008. And then began the saga, 2G spectrum scam hogged limelight and proved to be a major blow for the entire industry.

The Saga Began
The Comptroller and Auditor General (CAG) of India claimed that the spectrum scam had led to Rs 1.76 lakh crores losses to the government.

The Supreme Court also denounced the lack of an auction in 2008 and the first-come-first-serve policy used by the minister. Ultimately, the apex court cancelled 122 licences issued by Raja, and asked for a fresh auction.

But even after that the auctions were held and they turned out be a bigfailure, thanks to the high reserve price.
However, this time the auction seems to be a success with the government raking in Rs 52,500 crores so far- much above the target of Rs 40,000 crores.

According to experts, the reason behind the success being low reserve fee this time. Rationalizing the reserve price has helped to net in a good amount.

It should be noted that the government has lowered the reserve fee after each failed round.

In November 2012, the auction started for 1800 MHz spectrum and the reserve fee was kept at Rs 14,000 crores for a 5 MHz pan-India block. As a result, it yielded only Rs 9,704 crores for the government. For the 800 MHz spectrum, there were no bids in the four major circles of Delhi, Mumbai, Karnataka, and Rajasthan.

Even though the reserve fee was lowered, bidders found the reserve fee to be too high.

However, the present scenario is different as the 1800 MHz reserve fee was lowered by a further 26% this time and the 900 MHz one by 50%.

 

Even during 2010 3G airwaves auction, the reserve fees was modest; Rs 700 crores per MHz, or Rs 3,500 crores for a 5 MHz block. As a result, bidders turned up for it also.

Rosy Road Ahead

The ongoing spectrum auction has entered its eighth day today, at its 50th round, and the government has already received bids worth Rs 58,332 crores, much above the target of Rs 40,000 crores.

Bids worth Rs 34,743.2 crores have been received for 1800 MHz and Rs 23,589.62 crores for 900 MHz.

With this one thing is certain, that the era of nemesis for 2G spectrum is over and there is a rosy road ahead.