Idea says it bought auction spectrum for its customers’ sake

Idea, which was one of the four telecom operators to take advantage of the recent 2G spectrum auction to augment its holdings, said it would not have bought spectrum at such prices if it had not already sunk some money in.

It said that it decided to shell out the high price for spectrum only because it had invested in these circles and had a substantial customer base there, and abandoning them by not repurchasing the spectrum (which was taken away) would not have been fair.

“Faced with a Hobson’s choice, Idea participated in the Auction, which it may not have considered in a normal start-up situation,” it said in a statement.

Vodafone was the biggest spender in the auctions, followed by Telenor, Videocon and Idea. Telecom operators criticized the government for setting the reserve price of 2G spectrum close to the very high levels discovered in 2009 3G auction.

“Four years after full-fledged Operations in the above Service Areas, events placed Idea Cellular in an unenviable situation where it could either continue operations or abandon the Telecom business in these Circles. During this period, the Company had made investments of over Rs 5,100 crores in Capex and Start-up losses.

“During this period the Company made additional human investments of approx 2,000 team members, 200,000 channel partners and 8 million subscribers, all of whom had reposed their faith in the company,” it added.

Idea won 1800 Mhz spectrum in Tamil Nadu, Orissa, Assam, North East, J&K, West Bengal, & Kolkata, where it may have had to shut shop without spectrum otherwise.

“This effectively ensures the continuity of service to its over 8 million subscribers in these 7 New circles and protects the investments made in these Circles,” Idea Cellular said. The only circle in which it bought spectrum despite having some already was in Bihar, where it bought 1.25 MHz extra. Vodafone, in contrast, bought spectrum in a large number of circles.

A company having more spectrum can cut down on the number of towers it deploys, thus saving money.

However, Idea pointed out that “though spectrum may be a scarce resource, it certainly does have a finite price, and increasing the reserve price to stratospheric levels will not result in any greater value being realized.”

In all, Idea bought an additional 37.5 MHz of spectrum for Rs. 2,031.31 Crore at the rate of Rs. 54 Crore/MHz.

Idea had filed a Curative Petition before the Supreme Court appealing against the Order of 02.02.2012, on which proceedings are still going on.

“Idea Cellular continues to have a pan India footprint and we will continue to provide seamless voice and data coverage to our over 115 million users spread across the country,” said Himanshu Kapania, Managing Director, Idea Cellular.