The Union Cabinet of India has reduced the reserve price for auction of second-generation or 2G licenses by almost a quarter from the recommended, at Rs 14,000 crore ($2.5 billion) or at about 7.4 times the 2008 price, for five units of airwaves in the 1800 MHz band for all of India's 22 telecoms zones, or around Rs. 2,800 crore per MHz.
The Cabinet approved the recommendations of the panel of ministers on spectrum to keep the reserve price of the 800 MHz band (used by telcos on the CDMA platform) at 1.3 times that of the 1800 MHz band. It had also decided to continue with the existing annual airwave usage slab of between 3 and 8 percent of companies' revenue, higher than a flat 3 percent rate suggested by the sector regulator.
India is selling 2G license for the first time through an open auction, after the Supreme Court said a 2008 grant process was flawed and ordered all 122 zonal permits awarded in that year to be revoked. The base price is a 23% cut from the telecoms sector regulator's proposed price of Rs 181.1 billion.
Telecom companies went disappointed on the move as pricing would put too big a burden on telecom operators who would have to pass on the expense to subscribers, which would threaten the industry. India is the world's second fastest growing mobile phone market on the basis of low tariffs.