The first day of the wireless spectrum auction saw India’s biggest telecom giants bid for airwaves. This auction, the third effort by the Indian Government raise revenue from the sale of airwaves saw bids totaling 446.1 billion rupees ($7.12 billion).Some of the prominent names present during this auction were Mukesh Ambani’s Reliance JioInfocomm Limited, Vodafone Group Plc and Sunil Mittal’s Bharti Airtel. According to a press release on the Press Information Bureau website, these giants are competing for two bandwidth slots in 22 regional zones.
The Telecom Ministry had failed in their previous two attempts to raise revenue and this; the third attempt was seen by many as an attempt by the Government to ease the whole process of auctioning bandwidth. The floor price in the previous two actions did the bulk of the job in keeping away telecom operators, however, with that being lowered this time, the competition intensified to a great extent. Among the 2G players in India, Bharti and Vodafone needed to acquire 900 megahertz airwaves to continue services in India’s biggest mobile-phone regions where their licenses are set to expire later this year.
Ankur Rudra, analyst with Ambit Capital Pvt. Ltd., said, “These auctions are critical for the incumbents such as Bharti and Vodafone. Reliance Jio’s strategy remains a matter of speculation for now. We feel they are looking at making a calibrated entry rather than a big splash.”
India’s active wireless subscribers total over 750 million and this constitutes the world’s largest market after China. India is also the world’s fastest growing smartphone market, where data-enabled handsets are available for as little as 2,500 rupees, spurring carriers to raise broadband capacity.
The Ministry of Telecom under directions of Prime Minister Manmohan Singh aims to generate substantial revenue from the auction. This will narrow the shortfall to 4.8 percentof gross domestic product and prevent a credit-rating downgrade to junk. The total value of spectrum for sale is at least about 49,000 crore rupees, according to the notice inviting applications. However, many industry analysts are of the opinion that if the incumbent players, Airtel, Vodafone and IDEA limit their bids, the total collection from the auction may fall short of the government’s targets. In November 2012, less than a quarter of the government’s target was met with a feeble response to the auction where prices were nine times their original cost in 2008. Another auction in March attracted just one bidder, the Indian unit of Russia’s AFK Sistema.
Some companies have deposited cash which will be used as credit for the sale. This includes companies like Reliance JioInfocomm Limited (RJIL). The Mukesh Ambani owned company, according to analysts is keeping all options on the table and may alongside the main operators in India, bid across circles. Many analysts believe that telecom companies are starved for spectrum in Bihar, Maharashtra, Gujarat and Uttar Pradesh (East), hence the bidding here is likely to be fierce.