2G auction likely in Jan as EGoM agrees on pricing formula

An empowered group of ministers on telecom pricing has decided to accept the reserve price for auction of spectrum for the 900 and 1800 Mhz bands suggested by the Telecom Commission.

The commission has recommended a 15 per cent and 25 per cent hike in auction base price of 1,800 MHz and 900 MHz bands respectively over that suggested by the Telecom Regulatory Authority of India.

The commission had earlier this month suggested fixing a minimum Rs1,765 crore per megahertz (MHz) as the price for pan-India spectrum in the 1,800 MHz band, 15 per cent higher than TRAI's suggested price of Rs1,496 crore.

Even after the increase, the reserve price is lower than the one fixed for failed auction of November 2012, when spectrum in the 1,800 MHz band was offered at a base price of Rs2,800 crore per MHz.

With the EGoM giving its approval, it is likely that the government will hold the auctions by January 2014.

"The EGoM met today and we took a final decision on the reserve price and the EGoM has accepted the reserve price recommendations of the Telecom Commission," telecom minister Kapil Sibal told reporters in New Delhi after the meeting.

The government has decided that telecom companies whose 20-year leases are over will have to pay for renewal of their licences at a price which is discovered in the upcoming auction. So the price band set by the ministerial group is significant for the sector.

These auctions will also mean a lot for the government attempting to shore up its fiscal deficit at 4.8 per cent of GDP. It expects to earn at least Rs11,000 crore in FY14 from the auctions at the base price approved by the ministerial group.

Under the new base price formula, spectrum in the 900 MHz band will cost a minimum of Rs360 crore per MHz for Delhi, Rs328 crore for Mumbai and Rs125 crore for Kolkata.

An operator can bid for a maximum of 5 MHz in the 900 MHz band.

For the 1,800 MHz band, Sibal said that a decision will be taken on the quantum to be auctioned after consulting the Department of Telecommunications (DoT) about spectrum availability. "We have to finalise the total quantum of spectrum in the 1,800 MHz band that has to be put up for auction. That would be decided hopefully at the end of the coming week," Sibal said.