India left with no bidder for part of 2G airwaves auction

NEW DELHI Mon Nov 5, 2012 9:42pm IST

1 of 2. A Master of Business Administration (MBA) student talks on a phone as he stands outside a classroom during a break at the Management Development Institute (MDI) in Gurgaon, on the outskirts of New Delhi May 2, 2012.

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NEW DELHI (Reuters) - India has been left with no bidders for part of an upcoming cellphone airwaves auction after Tata Teleservices became the second company to drop out of the process.

India's sixth-biggest mobile phone carrier by customers pulled out on Monday after smaller rival Videocon Telecommunications dropped its interest earlier in the CDMA-based (Code Division Multiple Access) mobile phone services.

The telecoms ministry had planned to hold two separate auctions for airwaves used by GSM and CDMA-based mobile phone carriers hoping to reap a combined 400 billion rupees to plug a high fiscal deficit.

"Now there is no bidder left for CDMA. We will have to take a call on what to do," said a senior government official, who declined to be named, as the information is not yet public.

The official confirmed that Tata Tele and Videocon had withdrawn their applications to bid for CDMA airwaves.

A high auction starting price has deterred bidders, according to analysts.

The auction for GSM airwaves is scheduled to start from November 12 and was to be followed by the CDMA airwaves auction.

The auctions were organised after the Supreme Court ordered all cellular permits to be revoked after a flawed state sale in 2008.

Tata Tele is set to lose its operating permits in three of India's 22 telecoms zones and was looking to buy back airwaves in those zones.

A source with direct knowledge said the company did not see "a strong business case" in buying back airwaves in those zones.

Videocon Telecommunications Ltd had applied to bid for both GSM and CDMA airwaves. The company remains in the race for GSM airwaves after withdrawing from CDMA airwave bidding, the government official quoted earlier said.

Norwegian telecoms group Telenor (TEL.OL) and India's Idea Cellular (IDEA.NS), which were affected by the court order, have applied to bid for GSM airwaves in the auction.

Indian mobile market leaders Bharti Airtel (BRTI.NS) and Vodafone's (VOD.L) local unit were not affected by the court's decision but are bidding in the auction to buy extra airwaves.

The government has set a base price of 140 billion rupees for 5 mega hertz of GSM airwaves in all the 22 zones -- more than seven times what companies paid in the 2008 grant process. The base price of CDMA airwaves had been set 1.3 times the GSM airwaves.

(Editing by Mike Nesbit)

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