New Delhi, Jan. 17: The cabinet today halved the base price for the auction of spectrum in the 800 megahertz (MHz) band used to provide code-division-multiple-access (CDMA) mobile services.
A ministerial panel headed by finance minister P. Chidambaram had on January 7 recommended a price cut by "either 30 per cent or 50 per cent", following the government's failure to find any bidders for the spectrum in the November auction because of the high price.
"The base price in the next round of auction will be about Rs 9,100 crore," said telecom secretary R. Chandrashekhar.
In November, the government had set the base price at Rs 18,200 crore for 5MHz of pan-India airwaves in the 800MHz frequency band. CDMA operators need a minimum of 2.5MHz of spectrum per circle to provide services.
The price cut is expected to encourage Russian operator Sistema's local unit to participate in the upcoming spectrum sale. Sistema-Shyam, which is set to lose its 21 permits on February 4, did not participate in the November auction.
Tata Teleservices and Videocon Telecom, the other two contenders for CDMA spectrum, had withdrawn their bids.
"The decision to reduce the CDMA reserve price reflects the growing realisation that the demand for 800MHz is very limited. However, knowing the ground realities one would have expected a greater reduction," said a Sistema-Shyam spokesperson.
Hemant Joshi, partner, Deloitte Haskins and Sells, said, "As the business case is not clear for CDMA technologies going forward, there are unlikely to be many applicants."
Additional spectrum fee
Reliance Communications and Tata Teleservices will have to jointly shell out around Rs 2,900 as one-time spectrum fee based on the reduced reserve price for CDMA spectrum.
Charges for additional CDMA spectrum held by R-Com are estimated to be around Rs 1,752 crore and for Tata Teleservices Rs 1,155 crore, sources said.
The charges will be levied for spectrum allocated to them beyond 2.5MHz from January 1, for the rest of their licence period.