Telecom reserve price still high, see weak auction: Experts

The Cabinet has approved a 30 percent cut in the reserve price for sale of mobile phone spectrum in four zones that went unsold in the recent damp-squib auction. Airwaves in Delhi, Mumbai, Karnataka and Rajasthan found no takers in last months auction as bidders found the prices too high.

In an interview to CNBC-TV18, telecom analyst Mahesh Uppal and Bharat Bhargava, partner - telecom, E&Y say the reserve price is still very high.

According to them, the auction is going to be very weak.

Below is the edited transcript of his interview to CNBC-TV18.

Q: Though industry once again says that this is not enough and they are not particularly happy with that 30 percent cut, nevertheless it has been given the Cabinet's go ahead. What is your view?

Uppal: I think there is no doubt that the industry would be unhappy with this. It seems to reflect the view that somehow reserve prices need to be high. Even though this one is a little lower, but the numbers are still in thousands of crores.

I guess the government's own position is rather unenviable because if they were to lower rate to a much greater extent then they would be accused of trying to reduce the price of spectrum. That's unfortunately the result of all the mess we have seen with the Comptroller and Auditor General (CAG) and the aftermath of its report. So, I fear that we are now going through this situation where we will probably see another relatively weak auction. Hopefully, then try and come towards a more rationale price of spectrum.

Q: Do you believe that this is another instance of a failed auction or a doomed auction from the start? The government doesn't really have too much room left in terms of time. It has already said that it is not going to be able to roll out the auction process in January. It has only time up until March. What do you see as the options? As far as the main circles of Delhi and Mumbai are concerned, do you believe that there will be any takers this time around?

Uppal: Most people believe that the price of the Delhi and Mumbai circles is way disproportionate to the kind of revenues that the circles produce. Albeit inspite of the fact the revenues are huge, but so is the price. So, I do feel that we are going to see a relatively weak auction. I wouldn't go as far as to say it is doomed, but, yes, it is looking quite close to that.

Q: Do you believe that we are going to see another weak auction this time around?

Bhargava: I believe we will. The price is still very high. I think a new entrant operator will find it extremely difficult to make a business case. One or the other existing operator might have a go, but I think it is going to be very weak.