Bloomberg News

India Lowers Forecast for Wireless-Company Levy, Official Says

January 07, 2013

India lowered the amount it expects to collect from a levy on mobile-phone operators by as much as 110 billion rupees ($2 billion), a government official said after prices in the next spectrum auction were reduced.

The telecommunications ministry may raise only 200 billion rupees from the charge to be imposed on carriers within two weeks, said the official, who declined to be identified because of state rules. The ministry previously expected to generate 310 billion rupees from the one-time fee, which was announced in November following an investigation into low sale prices that led to the jailing of a former minister.

The government also today reduced minimum prices in a sale of second-generation spectrum by 30 percent after failing to find buyers in a November auction. The government was seeking to raise at least 700 billion rupees from spectrum sales and the one-time fee this fiscal year to help pare a budget deficit.

“The discount is helpful,” Rajan Mathews, director general of the Cellular Operators Association of India, an industry group, told Bloomberg Television India. “But is it adequate enough to generate the kind of participation the government is hoping for? That’s a big question.”

India’s mobile operators have combined debts of $23 billion, according to the group, whose members include Bharti Airtel Ltd. (BHARTI), Vodafone Group Plc (VOD)’s local unit and Idea Cellular Ltd. (IDEA)

March Auction

The levy likely will raise less money because it is tied to the sale prices of the airwaves, said Daryl Philip, an analyst with Mumbai-based Finquest Securities Pvt.

“Their expectations have dropped mainly because of the drop in reserve price,” Philip said.

The auction for the 1,800 MHz second-generation phone spectrum in four markets, including New Delhi and Mumbai, will start March 11, Telecom Minister Kapil Sibal told reporters in New Delhi. The country also will sell 800 MHz and 900 MHz spectrum by the end of March, he said.

A group of ministers recommended a 30 percent price cut last month after about 70 percent of airwaves on sale in November went unsold. That auction raised 94.1 billion rupees, less than 25 percent of the amount the government wants to raise from spectrum sales this fiscal year.

The cabinet may decide this month on the minimum price for the 800 MHz sale, Sibal said.

To contact the reporter on this story: Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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