India's 2G spectrum auction fails to attract significant interest

India's 2G spectrum auction fails to attract significant interest

India's long awaited 2G spectrum auction has failed to attract significant interest with 45% of spectrum reportedly remaining unsold after seven rounds and no bids in regions with the highest base price.

The Financial Times reports that bids totalling $1.7 billion had been received after the fifth of seven rounds of competition, less than a quarter of the amount its organisers had hoped to raise.

There were no bids for airwaves in Delhi, Mumbai, Rajasthan and Karnataka - the most expensive regions.

Only five players are participating in the auction process: market leaders Bharti Airtel, Vodafone and Idea Cellular, as well as VideoconBSE and Nordic carrier Telenor, which only confirmed it would participate at the start of proceedings yesterday after months of deliberations.

The auction was arranged after India's Supreme Court cancelled 122 2G licences earlier this year deeming the previous bidding process in 2008 that issued mobile permits to nine telcos to have been flawed.

In the turmoil that followed the decision, several operators decided to leave the Indian market altogether, including Middle Eastern carriers Etisalat and Batelco.

The partial failure of the auction is considered an embarrassment to the Indian government which may be set to gain nothing if it refunds the licence fees paid by operators in the 2008 auction, according to India's Economic Times.

India's Cellular Operators' Association (COAI) told the publication that the muted response only strengthened its argument that the spectrum was too expensive.

"We had maintained that the auction would not take off. There was not enough spectrum put up for auction and the Supreme Court is already questioning the government about that. Secondly, the reserve price was too high. Third, the government said it was giving liberalised spectrum in the auctions, which made no sense because 1800MHz that is being sold is primarily used for voice. This makes no business case which explains the muted response," Rajan Matthews, director general of the COAI told the publication.

A second auction for CDMA spectrum has already been cancelled following the withdrawal of the last remaining applicant, Tata Teleservices, last week.

The auction is expected to conclude with a second day of bidding on Wednesday.

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