Taking lessons from the flop 2G auction last month, the Indian government on Thursday slashed reserve price for unsold 1800 MHz spectrum in four zones by 30 percent. These zones - Delhi, Mumbai, Karnataka and Rajasthan – found no takers as the companies found the prices too high.
"The reserve price for 1800 MHz band in the service areas of Delhi, Mumbai, Karnataka and Rajasthan be reduced by 30 percent from the previous reserve price," an official statement said citing a decision taken by the Union Cabinet at its meeting on Thursday evening.
The base price in the last month's failed auction was Rs. 693.06 crore for Delhi circle, Rs. 678.45 crore for Mumbai, Rs. 330.12 crore for Karnataka and Rs. 67.08 crore for Rajasthan. After the 30 percent cut, the new reserve prices would be Rs. 485.142 crore for Delhi, Rs. 474.915 crore for Mumbai, Rs. 231.084 crore for Karnataka and Rs. 46.956 crore for Rajasthan.
The government also finalised the reserve price for spectrum in 900MHz band, which will go for auctions along with 1800MHz airwaves in Delhi, Mumbai, Karnataka and Rajasthan. The auction for spectrum in 900 MHz will be held in Delhi, Mumbai and Kolkata.
"The reserve price for 900MHz spectrum in Delhi and Mumbai be twice the revised reserve price for the 1800MHz and in Kolkata be twice the price obtained for the 1800MHz band for this service area in the auction held in November, 2012," it added.
"After the auction price becomes available, the earlier payment made on the basis of reserve price would be adjusted against the amount actually due," the statement noted referring to the payment of spectrum currently held in 1800 and 900 MHz bands by existing operators in the four zones.
Despite a 30 percent cut, industry experts believe the reserve price have remained too high. “Its very unlikely that there will be high participation even at this price also. Though the circles on offer are very valuable, the price is disproportionate to the potential revenue,” DNA India quotes Mahesh Uppal, director, ComFirst India as saying.
Cellular Operators' Association of India (COAI) is also quite skeptical over the development. “We think it does not make business sense to bid for 900MHz spectrum at double the price of 1800MHz, even if it is more efficient, as there is not much difference between both bands in the metros,” says Rajan Matthews, Director at COAI.