Telecommunications officials in India are set to issue the remaining licenses for cellular service in the next few weeks, just as initial licensees are beginning to launch their systems in four metropolitan areas in the country.
India’s Department of Telecommunications (DoT) accepted technical bids in June and financial bids in early August for 18 regions in India-basically covering the remaining parts of the country not covered with the initial eight licenses issued-two each for Bombay, Calcutta, New Delhi and Madras. All licenses in India are for 15 years and require Global System for Mobile communications-based technology systems.
The DoT is expected to gather a total of $6.4 billion for this cellular tender, though one estimate states the present net value of the bids is likely to aggregate to approximately $11 billion, according to the U.S. Embassy in New Delhi. “The bids were marked by a big difference in the license fee quoted by the highest and the lowest bidders for most of the [regions],” said an embassy report.
A license will be offered to each of the top two bidders in the regions. However, the DoT will ask the second-highest bidder to match the bid of the top company, according to Ayesha Ahmad, an associate at Cambridge, Mass.-based Pyramid Research Inc.
“The DoT profits from it because they figure if Company A is paying $3 million for one city, then why should Company B pay $2 million,” said Ahmad.
India has been touted as being one of the most lucrative new cellular markets because of its continuing population growth. Studies have estimated India’s population of 920 million will approach China’s 1.2 billion by the year 2025.
The cellular market in India has the potential of matching China’s market in size in the next five to seven years, according to Scott Higgins, director of operations in India for Motorola Inc.’s Cellular Infrastructure Group. Motorola has garnered five of the eight equipment contracts for the original licensees.
The most lucrative regions of India-and those receiving the highest bids in the latest round-are Maharashtra and Gujarat. In both states, AT&T Corp. and partner Aditya V. Birla Group placed the top bid and a U S West Inc./BPL Systems and Projects partnership placed second.
AT&T/Birla also placed second in the Karnataka region, while the U S West/BPL partnership placed first or second in three other regions. The other top American bidder was the Nynex Corp./Reliance Industries Ltd. team, which placed first or second in seven less lucrative regions. U.S.-based Cellular Communications International Inc. also placed first in one region.
Licenses originally were offered in 20 regions, but two of them-Jammu-Kashmir, the politically unstable state in northwestern India, and the remote Andaman and Nicobar islands-did not receive any bidders.
At some point, the DoT may operate in these non-lucrative regions themselves, suggested Ahmad.
This second round of cellular license awards likely will correspond with network launches in the four major cities in India. Seven of the eight carriers have projected they will launch service in the September/October time frame.
The eighth carrier got a jump start. Modi Telstra, a partnership with Australia’s Telstra and local partner BK Modi Group, began service in early August. Modi Telstra, using Nokia Corp.’s infrastructure equipment, reportedly had a customer base of less than 1,000 subscribers at the end of August.
Dianne Hammer is a freelance telecommunications writer based in Denver, Colo.