Just a day before Diwali, on November 12, the auction for 2G spectrum starts.

The week, in all possibility, could see the public sector oil marketing companies reduce petrol prices by about Re 1 a litre. Fuel was added to this when the Indian Oil Corporation Chairman R S Butola said, on November 9, that a decision on revising petrol prices was in the offing.

Both, in the case of 2G spectrum auction and petrol price revision, the Government would have a point to prove.

The auction is being held after the Supreme Court cancelled all licences issued on or after January 10, 2008. And the petrol price cut is to be seen in the light of criticism that although the Government has given the oil companies freedom to revise prices, an artificial control continues.

MUTED PARTICIPATION

The 2G spectrum auction will see big names from the sector. There are five companies in the fray, Bharti Airtel, Idea Cellular, Vodafone India, Telenor and Videocon. The Government is expecting at least Rs 14,000 crore from these auctions, but given the low level of interest it is unlikely to achieve the target.

Bharti Airtel’s Chairman and Managing Director Sunil Bharti Mittal last week said that the auction could get over in a day or two, unlike the auction for 3G and broadband spectrum held in 2010, which lasted for nearly a month.

The main reason for the low interest is the high base price fixed by the Government. None of the players have applied for pan-India spectrum. Bidders may even give a miss to key areas such as Delhi and Mumbai due to the steep base price.

Barring Telenor and Videocon, none of the other players whose licences were cancelled (by Supreme Court order) is participating in this auction.

VIDEOCON STRATEGY

It will be interesting to see how many circles Norway’s Telenor will be able to retain out of its existing nine circles. Videocon’s strategy will also be keenly watched as it is widely believed that this company will be acquired by Reliance Industries after the auctions.

Reliance had followed a similar strategy at the broadband spectrum auction in 2010 when it bought out Infotel Broadband after it won the pan-India spectrum.

The outcome of the auction has wide ramifications for the incumbent operators and the Government. For the Government, the outcome of this auction will set the pace for future spectrum allocation. A flop show will force the Government to do a rethink on its current policies. The revenue generated from the auction is also vital for bridging the fiscal deficit; therefore, muted bidding will not be good news for the exchequer.

On the other hand, the incumbent players would want the bidding to get over in the first round itself, because the final bid price will be used to extrapolate the one-time fee they have to pay for the excess spectrum they already own above 4.4 Mhz. Low bid amount would keep the one-time fee low as well.

The auction price also has a bearing on licence renewal and spectrum re-farming in 2014 for the incumbent operators.

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