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Corporate Jan 17, 2013

Sistema unhappy with CDMA reserve price cut, asks for more

By Sindhu Bhattacharya

New Delhi: The Government's decision to halve reserve price of Code Division Multiple Access (CDMA) airwaves may not salvage the upcoming auctions, at least for these airwaves.

Not only has Sistema Shyam Teleservices (SSTL), the only pure play CDMA company, said the price reduction is not enough, other players may also decide not to participate in the auctions unless there is clarity on whether the spectrum on offer in this band, 800 mhz, is liberalised or not.

Liberalised spectrum would allow companies to offer any services, not just CDMA, on this frequency which is considered much more efficient than the 1800 mhz frequency currently used by GSM players.

The move to cut CDMA price by such a hefty amount is expected to benefit only Sistema, which is otherwise set to lose licences in 21 out of 22 circles. AFP

The move to cut CDMA price by such a hefty amount is expected to benefit only Sistema, which is otherwise set to lose licences in 21 out of 22 circles.

The other two companies, Reliance Communications and Tata Teleservices, are already dual technology players with fingers in both, CDMA and GSM pie.

In a statement, Sistema welcomed the price reduction but said a greater reduction in prices was expected. It did not say whether the new price would enable it to participate in the upcoming auctions. In November last year, not a single CDMA player had participated in the auctions.

Also, after today's decision of the Union Cabinet, per mhz cost of CDMA spectrum has come down to Rs 1,820 crore from Rs 3,640 crore earlier. Since CDMA players are allowed 2.5 mhz spectrum, this means they would now have to shell out Rs 4,550 crore.

But the government has allowed deferred payment with only 25 percent of the amount payable in the first year followed by a two-year moratorium.
So in effect, if Sistema were to participate in any future CDMA auctions, it would need to pay just about Rs 1,137.5 crore immediately.

But even this amount is adjustable against the Rs 1,650 crore licence fee paid earlier. So in effect, Sistema will have to pay nothing for three years.

One fails to understand how much more reduction in price is sought by Sistema.

Another fallout of the reduced price is a commensurate reduction in the one-time fee that CDMA players have to pay. At the earlier price, the total CDMA Industry outgo would have been about Rs 6,000 crore but now it will be just Rs 3033 crore.

by Sindhu Bhattacharya

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