Why no takers for 2G spectrum auction?

NEW DELHI, INDIA: Even as the Indian telecom industry has given lukewarm response to the round two of the 2G auction, slated for March 11, it seems to be heading for market consolidation in tandem with tumultuous conditions.

With four circles- Delhi, Mumbai, Rajasthan and Karnataka- up for bids, only Sistema Shyam Teleservices (SSTL) has registered for 800 MHz CDMA spectrum. Although SSTL's 21 licences were quashed by the apex court last year, it bidding for spectrum clearly indicates that the telco is aggressively eyeing country's telecom pie.

No CDMA operator turned up in the November 2012 auction that forced the government to cut the reserve price of 800 MHz by half. GSM lobby, however, cried foul and sought a further cut. And this time, they abstained from participation. The tactic is killjoy for the government which may now mull over further cut in base price.

Speaking to CIOL over phone from Barcelona, COAI chief Rajan S Mathews said the telecom operators have been facing several challenges, including exorbitant pricing and spectrum refarming. "The concern also includes the government doubling the reserve price for 900 MHz band than that of 1800 MHz," he said.

COAI also believes that legal twists and turns are worrisome for the industry. "In addition, there are legal issues. The GSM operators are not buying spectrum for the fear of judicial tangles," he said. Spectrum refarming that would incur additional cost, is another contentious issue, said Mathews.

However, the GSM body denies that these developments fuel market consolidation. "There will be no market consolidation in near future. In an overall scenario, the operators are in weak position," he said. Mathews said that there is no feasibility of mergers and acquisitions (M&A) and there would be five or six major players in the Indian telecom space.

Business&Market.net founder-analyst Deepak Kumar believes that pricing is a core factor. "With the 2G segment passing through a phase of consolidation, operators in India are no longer in dire need of spectrum, especially at prices higher than before," he said.