COAI blames government for 2G flop

Blaming flawed executive action as the reason for the poor outcome of the 2G spectrum auction that concluded on Wednesday, Rajan Mathews, secretary general of the Cellular Operators Association of India (COAI) said, ''The government had decided the amount of spectrum that had to be put up for auctions. I don't believe that was specified by the courts. The reserve price was not something that the Supreme Court specified - that is something that the government accepted in terms of its deliberations.''

The COAI, whose members were the main participants in the auction and led the bidding, said, ''The results are exactly what the industry had predicted. All along, the COAI has maintained that the reserve price was guaranteed to have a detrimental effect on auctions. That it would ensure that there were limited players coming into the market to bid and had also indicated that there would be extremely muted bidding, and for several circles there would be no bidders at all.''

In an official statement, COAI said, ''The root of problem lies with the procedure adopted by the government in executing the auctions. The COAI is in agreement with Supreme Court that auction is the best and the most transparent way to determine the allocation and market price of a resource as rare as spectrum for commercial use.''
 
2G auction will gain zilch for exchequer
Compounding the government's woes arising from the dismal outcome of the 2G spectrum auction, it also appears that the government will not be able to keep any the Rs9,477.64 crore provisional revenue from the auctions in the current fiscal. In fact it may actually lose money in the deal (See: 2G auction ends with only Rs9,400 cr garnered).

According to experts, since only 33 per cent of the bid amount has to be paid immediately, only Rs3,190 crore would be due in the current fiscal. At the same time, there are three operators whose cancelled license fee was adjusted against the earnest money deposited for the auctions - Idea's Rs1,000 crore and Videocon and Telewings' (earlier Uninor) Rs1,658 crore each. This totals to Rs4,300 crore.

Using this as the moratorium of the payment, it is unlikely that any payment will come through during the current fiscal - unless some companies decide to pay upfront to save upon the 9 per cent interest, which under the current circumstances and prevailing market conditions remains unlikely.