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India: Bidders reluctant in tainted 2G spectrum auction


Former telecom minister A. Raja arrives at Parliament in New Delhi on May 16, 2012. A day after he walked out of Tihar Jail after securing bail in the 2G spectrum scam, A Raja went to Parliament. The former telecom minister was in jail for over 15 months after being arrested in February last year for his role in the 2G scam.



India's ballyhooed auction of 2G telecom spectrum -- designed to undo the theoretical damage of a decision to allot licenses on a first-come, first served basis -- appears to be turning out a major disappointment for the government.

Prime Minister Manmohan Singh's United Progressive Alliance government was hoping to secure a total of around $7.5 billion from the auction, including around $3.3 billion from the auction of licenses in the 800 Mhz band. So far, there have been no bids for the 800 Mhz band, and the total of the bids for the other blocks was only around $1.7 billion, India's Daily News & Analysis (DNA) newspaper reports.

DNA cited Jaideep Ghosh, director KPMG, as saying the auction is a flop because of the high reserve price of $2.6 billion that the government set for the 5 Mhz spectrum band. Telecom operators are also reluctant to bid aggressively because the results will affect future auctions, Ghosh said.

The paper quoted Mahesh Uppal of Comfirst India as saying that it is unlikely the auctions will generate more than $3.75 billion in total.

“This response proves that the estimates of the department of telecommunications and the Telecom Regulatory Authority of India were excessively optimistic,” DNA quoted Uppal as saying.

As GlobalPost reported earlier, the auction of 2G telecom spectrum licenses began Monday, in an effort to undo some of the damage from the scandal that started an ongoing anti-corruption drive that has hammered Singh's Congress Party.

The government will auction the 2G spectrum freed from cancellation of 122 telecom licences by the Supreme Court in February.

A total of 11 blocks of airwave frequencies in each telecom circle, barring Delhi and Mumbai, where there are only eight blocks, will be up for bidding, the magazine said. At the end of the auction, telecom companies will have the option to pay full amount of 33 percent of final price by December 25.

The final price will then determine the amount that government will get from a one-time levy on spectrum held by existing operators beyond 4.4 MHz.

As GlobalPost reported (many times), the so-called "2G telecom spectrum scam" started a massive backlash against Singh's United Progressive Alliance (UPA) government in 2011, when the Comptroller and Auditor General (CAG) alleged that then-Telecom Minister A. Raja had cost the treasury as much as $33 billion by allotting licenses on a first-come, first-served basis instead of through a transparent auction.