2G Bidding Fiasco Takes Ugly Turn As Vodafone Alleges Favoritism

The soon to be auctioned 2G Spectrum has come under heavy criticism for apparently favoring a particular set of companies. As per the revised norms, Vodafone India feels the spectrum auction guidelines, are “illegal, discriminatory and benefiting one set of players”.

The core of the matter is the three separate ‘Bands’ of spectrum that have to be tabled for auction. At present Indian operators work mainly on the 900 & 1800 MHz Bands which are reserved for 2G Communication. However, there’s a separate Band exclusively used for the Close Division Multiple Access (CDMA) telephony deployed by very few players who do offer such type of communication.

Interestingly, the Government has chosen to keep the ‘Base Price’ for 900MHz Band ‘three times’ the base price for 800MHz Band. This is where mobile service providers are crying foul. They justifiably feel the base price for both the spectrums should be similar, if not same. This huge variation clearly favors the company who operate CDMA services & the auction will not pinch them as much it will for the players in the 900MHz Band.

2G telephony, the base for any GSM based communication has been marred by multiple setbacks, controversies & scams. Ever since the multi-billion  dollar scam perpetrated by A. Raja has surfaced, mobile companies have been severely affected. However, the biggest blow was the mass-cancellation by the Supreme court who clearly instructed TRAI to conduct a fresh round of Auctions in an attempt to wipe the slate clean & start afresh. This decision, though perceived as a much needed attempt at cleaning up the mess, will eventually prove very costly for all the players involved.

The cost factor is so high that some players have had to drop out. While Telenor has cleverly stated that it won’t bid unless the base price is halved, other players like Sistema are seeking legal recourse. Incidentally, Vodafone too has openly stated that it has kept all possible options on the table to combat this crisis.

The 2G re-Auction is expected to fetch around Rs. 450 Billion (@ US$ 850 Million). The question that now arises is; will it be the customer who will eventually have to pay to recover these expenses?

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