No CDMA auction: Govt may lose Rs 7000cr

With no takers for the auction of radio frequencies in the 800 mhz or CDMA band, the government faces a trying situation. It involves issues around the valuation that it arrived at for the spectrum, the future roadmap for allocations in this technology band, the defense against Sistema's case as well as the one-time charge for excess spectrum. CNBC-TV18's Malvika Jain reports the story of an auction that seems to have failed even before taking off.

There are no bidders for CDMA spectrum in the upcoming auction. The pull out by Tata Teleservices from the three circles that it had initially applied for comes three days after Videocon said it was withdrawing its initial application to bid for this spectrum across the country.

Sistema did not even apply and is instead hoping for a positive verdict on its curative petition at the Supreme Court. The development raises fresh questions - some of which are already in court - on the fate of the auctions and the manner in which the department of telecom under Kapil Sibal pushed through decisions that clearly do not match ground reality in the market.

The key questions are:

• What is the future of CDMA in India?
• Did the TRAI, the dot and the entire government overlook industry feedback that CDMA services were not doing well and that the auction reserve price of 1.3 times that of the gsm band frequencies of 1800 mhz was too high?
• What about Sistema's plea that even in 2008, the cdma frequencies had no takers and therefore its permit issued under the first come-first served principle (FCFs) should not have been cancelled?

The one time charge for excess spectrum has also taken a knock with today's development. This because, circles like Delhi and Mumbai have no bids - not just for CDMA but even GSM frequencies. This, experts warn, implies that price discover, a must for finalizing the one time charge, cannot take place. How will the government get around this now?

While Sistema and Tata Tele are pinning their hope of their respective curative petitions before the Supreme Court, it is clear that the government is set to lose approximately Rs 7000 cr that it had expected from the CDMA spectrum auction. Telecom companies are also gearing up for a legal battle on one time charge issue which could cost the industry Rs 27000 cr.

According to sources telecom companies are awaiting the outcome of the Idea Cellular plea listed at the supreme court on the November 9 in which the company has sought that all cancelled spectrum be bid out. The companies are also awaiting clarity from TDSAT on whether 6.2 mhz or 4.4 mhz is the contracted spectrum.