Auction of 2G airwaves opens to muted response

New Delhi: An auction of 2G mobile phone airwaves attracted nearly $2 billion worth of bids on Monday but no interest for four zones in a process some carriers have said is too pricey.

The government received bids worth more than Rs 9,200 by the end of the fifth round of the auction, out of seven held on the day, Telecommunications Secretary R. Chandrashekhar said, though he said there had been no demand yet in the Delhi, Mumbai, Karnataka and Rajasthan zones.

India is for the first time selling second-generation mobile spectrum through an auction after the Supreme Court ordered the revoking of permits granted to eight carriers in a scandal-tainted process in 2008.

The auction - covering 22 zones in total - has no set timeframe and is due to run for as long as it takes for bids to dry up.

"Fifty-five to 60 percent of what had been put up for auction has been bid for," Chandrashekhar said. Within each zone a number of blocks are on offer.

Five operators - Bharti Airtel, Vodafone Group Plc's local unit, Norway's Telenor ASA, Videocon Telecommunications, part of Videocon Industries, and Idea Cellular - had applied to participate in the auction.

Telenor needs to win spectrum in the auction to continue operations in India, the world's second-biggest mobile phone market, as it is set to lose all its permits.

Idea Cellular, set to lose seven of its licences, has to win them back to retain its pan-India presence.

The government had set a starting bid price of 140 billion rupees for 5 megahertz of airwave space in all of the 22 telecommunications zones. The base price was more than seven times what carriers paid in 2008.

The finance ministry had initially estimated the auction would raise 400 billion rupees, betting on it to rein in its high fiscal deficit. However, the tepid demand at the sale may make it difficult for the government to meet that target.

India has also been left with no bidders for part of the sale after Tata Teleservices and Videocon Telecommunications dropped their interest earlier in CDMA-based (Code Division Multiple Access) mobile phone services.

Mobile phone market leaders Bharti Airtel and Vodafone India, which are not affected by the court order, are taking part in the auction to buy additional spectrum.

The muted response to the 2G auction is in contrast to the sale of 3G airwaves that the government held in 2010, which lasted more than a month. Government raised more than $12 billion from that auction.