Panel for up to 50 percent cut in CDMA base price

NEW DELHI Mon Jan 7, 2013 2:00pm IST

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NEW DELHI (Reuters) - An Empowered Group of Ministers (EGoM) has recommended a cut of up to 50 percent in the auction reserve price for airwaves used by phone carriers operating on the CDMA platform, raising the odds for the local unit of Russia's Sistema to continue operating in the world's second-biggest mobile phone market.

The panel on Monday recommended to the cabinet that the starting price for the airwaves be cut by 30-50 percent, two government officials told reporters. The cabinet has the final say on airwave prices.

India is betting on the revenue from phone airwave auctions and stake sales in state-run companies to plug its widening fiscal deficit. The government raised less than a quarter of its 400-billion-rupee target in a November auction.

The government is putting on the block GSM airwaves worth 200 billion rupees in the next auction, which Telecommunications Minister Kapil Sibal said is due to start from March 11. The CDMA airwaves auction will also happen in March after bidding for GSM, he said.

Sibal declined to comment on any recommendation for a cut in CDMA airwave reserve price.

India auctioned airwaves in November after a court revoked the permits of several cellular carriers and redistributed airwaves through open bidding.

The auction did not see any takers for CDMA (Code Division Multiple Access) airwaves, while only part of the airwaves for more popular GSM services were sold with carriers criticising the reserve price as too high.

The government had earlier set the reserve price of CDMA airwaves at 36.4 billion rupees per megahertz for all of India's 22 telecommunication zones, or 30 percent higher than that of GSM airwaves. CDMA operators need a minimum of 2.5 megahertz of spectrum to provide services.

The CDMA airwave auction is crucial for Sistema Shyam TeleServices Ltd, which has been ordered to shut operations in all but one of India's 22 zones because it did not participate in the last auction.

The dispute over Sistema's permits has strained ties between India and Russia, which has a 17 percent stake in the company's Indian venture.

Reliance Communications, India's No.3 carrier that operates on both GSM and CDMA technology platforms, rose as much as 3.5 percent after the news. The company has not said if it is looking to bid for CDMA airwaves, but will benefit from a lower surcharge for existing airwaves.

Tata Teleservices (Maharashtra) Ltd, the listed unit of India's sixth-biggest carrier Tata Teleservices, also rose 2.3 percent.

Companies, whose permits have been ordered to be revoked by the Supreme Court have been asked to shut down operations by January 18. But government officials have indicated that The telecommunications ministry might seek more time for them from the Supreme Court to attract bidders in the next auction.

(Additional reporting by Aradhana Aravindan in MUMBAI; Editing by Matt Driskill)

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