Going against a 2G auction boycott

The SSTL bid is the only one for CDMA airwaves. Source: AP

The SSTL bid is the only one for CDMA airwaves. Source: AP

Russia’s AFK Sistema became the sole bidder at the auction organised by the Indian government to sell CDMA spectrum licenses.

Sistema Shyam Teleservices (SSTL), owned by Vladimir Yevtushenkov’s AFK Sistema, has become the sole bidder for CDMA frequencies in India. SSTL’s competitors had agreed to boycott the March auction and have not submitted a single bid for the tender. It would seem that market participants are trying to force the government to lower the starting price by sabotaging the auction. But officials are ready to respond with an antitrust probe.

 “The SSTL bid is the only one for CDMA airwaves,” a person familiar with the situation told PTI. The auction slated for March 11 is crucial for the company, which lost its CDMA licenses last year.

In February 2012, India’s Supreme Court cancelled 122 GSM and CDMA licenses issued in 2008 to 11 telecom companies following a ruling that they had acquired licenses at knock-down prices. SSTL then lost 21 of its 22 licenses for cellular services in 22 telecom circles in India. In November 2012, the Indian government offered a part of the spectrum to telecom companies. But the auction failed, because the price – $3.3 billion for a 5MHz band in the 800 MHz CDMA spectrum – was considered exorbitant.

After President Vladimir Putin visited India, the local authorities agreed to halve the starting price for CDMA licenses.

The March auction will offer licenses for the frequencies that were not purchased in November, as well as the frequencies of the operators whose licenses expire in 2014. “The March 11 auction opens new opportunities, as neutral frequencies are up for grabs, which makes it possible to plan a switch to new generation LTE technology, a spokesman for AFK Sistema said. “Besides, a broader spectrum can be acquired for 20 years on quite easy terms – the first payment is 25 percent of the total, and the remaining 75 percent can be paid in installments over 10 years with a three-year grace period.” 

But other market players clearly consider GSM licenses to be too expensive. The Hindu reports that the telecom companies boycotted the auction, making no bids whatsoever, suggesting that a cartel agreement is in play.GSM operators are trying to have the government revise the starting price and redraw procedures.

The Indian Ministry of Finance hoped to raise around $5.5 billion at the March 11 auction, which was thought of as the main source of money to address the country’s fiscal deficit. “We need to analyse the outcomes of this move by Indian operators, a high-ranking telecom official says. “Based on a decision of the Supreme Court, a notice has been issued inviting companies to make bids in the third round of the auction. Changes can only be introduced at this level.”

According to the official, the lack of bids will mean that sales of licenses for the 305 MHz band will be blocked. He didn’t say whether the auction with a single bidder would be cancelled. The Competition Commission of India may look into the case of GSM operators, he added.

First published in Russian in Gazeta.ru.

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