In the previous rounds the auctions fetched the government less than a quarter of the Rs. 45,000 crore it had expected on the basis of the reserve price.
There were no bidders for spectrum in some lucrative circles — a far cry from the 3G spectrum auction three years ago in which telecom companies were jostling with each other in a 35-day process that netted the government RS 67,000 crore.
The recommendations of the commission, however, have left the industry divided. Incumbent GSM operators were disappointed, let down by the fact that the commission has also suggested a 25% increase in the reserve price for 900-MHz spectrum in the lucrative Delhi, Mumbai and Kolkata circles.
On the other hand, CDMA and dual-technology players have welcomed the commission’s suggestion to auction 800-MHz spectrum simultaneously with other bands.
A successful selling of radio spectrum is critical for the government’s fiscal math in an election year amid a widespread economic deceleration. The unexpectedly cold response in the last two attempts prompted the government to ask the regulator and the commission to recommend a new set of prices.
In the final analysis, the group of ministers, which will now discuss the proposed spectrum prices, will have to strike the right balance between two primary objectives: optimising government revenues and minimising any adverse fallout on call rates that consumers pay. The target should be to reach the right equilibrium between these two objectives.