Telecom companies formed cartel in 2G spectrum sale: CAG - Angel Broking

A unit of the Comptroller and Auditor General (CAG) of India has slammed the recent spectrum auctions, saying private companies acted as a cartel while the government was lax in implementing and supervising the process in the wake of the 2G spectrum scandal. This is the second instance that CAG has raised the red flag over the government's spectrum policy, the first being in 2010, when it indicted the UPA government and former communications minister A Raja for causing a loss of up to Rs. 177,000cr by selling airwaves at a fraction of their original value.

The failed auction cost the cash-starved government dearly as it could have raised tens of thousands of crores from a successful sale of spectrum, the audit said. The government has held two rounds of auction in last seven months. In November 2012, the government could raise only Rs. 9,407cr against the anticipated ~Rs. 45,000cr if the companies had bought all the spectrum at the reserve price set. In addition, the government was forced to cancel the sale of CDMA airwaves, as there were no bidders for these frequencies. Despite reducing the base price, the government's attempt to sell the unsold GSM spectrum in the second round in March ended in a failure after all companies pulled out of the sale process. Sistema Shyam, the sole bidder in the sale process, bought 40% of the CDMA airwaves on offer at the base price. The absence of all major operators in both rounds of the auctions had led to speculation they had collectively decided to not participate, but this is the first time that an official body has directly accused them of cartelization.

We continue to remain Neutral on the overall telecom sector.

Source : Equity Bulls

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