Reserve price for spectrum auctions may be cut, M&A rules tweaked

NEW DELHI: India is open to further reducing the reserve price for the next round of spectrum auctions if the sector regulator proposes such a move, a senior government official said, a step which would bring further cheer to the debt-laden telecom industry. The latest comments come a few weeks after chairman of the telecom regulator, Rahul Khullar, echoed the struggling industry's views saying that the failure of the recently-concluded auctions in November and later in March was because of the high reserve price for spectrum.

The two remarks also underline a notable shift in the government's approach to the telecom industry - from confrontationist to being more sector friendly, say experts. The Telecom Regulatory Authority of India (Trai) is in the process of sending its recommendations to department of telecommunications (DoT) after the government sought its views following the failure of the two auctions.

The government had fixed the reserve price of Rs 14,000 crore for a pan-India block of spectrum in the traditional GSM band of 1800 MHz for the November auctions. The government raised just under a fourth of the expected Rs 40,000 crore with 60% of the spectrum remaining unsold. Even after reducing the reserve price in March, most operators still stayed away and only 40% of the CDMA spectrum put on the block was sold.

According to an industry body's estimates, the telecom industry's total debt ballooned to Rs 2.5 lakh crore during 2012-13, from Rs 1.85 lakh crore in 2011-12. A large part of the debt had been taken by companies to fund the purchase of expensive 3G bandwidth through auctions in 2010.
M&A Policy

The official told ET that the government was also revisiting the draft mergers and acquisitions policy after new operators - the ones who bought spectrum in the latest two auctions- cried foul.

Companies such as the Indian units of Norway's Telenor ASA and Russia's Sistema JSFC said the draft rules will make mergers and acquisitions very difficult as the cost of acquisitions would become very expensive. "We are aware of the genuine issues raised by the operators and are studying them," the official said.

However, telecom players, who were awaiting the M&A guidelines for clarity on spectrum sharing and trading, would be disappointed after the official confirmed these two had been put on the back burner. "Not as of now," he said.

Telecom minister Kapil Sibal had earlier said that the guidelines will be out by September end.