Panel advises base price cut for unsold 2G airwaves

Sun rises over the telecommunication towers in New Delhi December 22, 2007.

NEW DELHI (Reuters) - A panel of ministers wants to cut the reserve price of mobile phone airwaves by 30 percent in four zones to attract bidders that shunned last month's auction because the prices were too high.

India, betting on the sale of phone airwaves among other measures to plug its widening fiscal deficit, raised less than a quarter of its 400 billion rupees target in the last airwaves auction.

The government plans another auction of the unsold airwaves in the 1800 megahertz band for the four zones - Delhi, Mumbai, Karnataka and Rajasthan - during the current fiscal year ending in March, telecommunications minister Kapil Sibal said on Friday after a meeting of the ministerial panel.

The government will also auction airwaves in the superior 900 megahertz band in a separate but simultaneous auction in three zones - Delhi, Mumbai and Kolkata - Sibal said. He did not comment on the auction reserve prices.

Two senior government officials told reporters the ministerial panel had recommended a 30 percent cut in the reserve price of airwaves in the four zones to the federal cabinet.

They recommended the reserve price for the 900 MHz band should be twice that of the 1800 Mhz band, they said.

The cabinet has the final say.

The proposal to cut the price is "certainly in the right direction but possibly not good enough", said Rajan Mathews, director general of lobby group Cellular Operators Association of India.

He said the revised base price would still be too high to attract serious bidding interests in the country's two biggest cities, Delhi and Mumbai.

India's first sale of second-generation (2G) mobile phone airwaves by auction last month came after the country's Supreme Court ordered the cancellation of permits granted in a scandal-tainted process in 2008.

For 5 megahertz of airwave space in all of the country's 22 telecommunications zones, the government set a bid starting price of a total of 140 billion rupees, more than seven times what carriers paid in the 2008 sale.

The cumulative reserve price for the four zones that did not get any bids was about half of the price for the whole country.

With more than 900 million customers, India is the world's second-biggest wireless services market after China. Bharti Airtel Ltd (BRTI.NS) and Vodafone Group Plc's (VOD.L) local unit are the country's two biggest carriers.

(Editing by Helen Massy-Beresford)