India reduced the minimum price for airwave access in an attempt to sell mobile wireless service spectrum in a recent auction. This is the second time airwave access has been put up for auction in India, as the first sale in 2012 saw few takers.
The sale was prevented in the first instance due to bidders being hesitant over high floor prices set by the Indian government. However, country officials have higher hopes for the current auction, where response is expected to be “measured,” Gartner research director Kamlesh Bahtia told ITNews.
Bahtia stated that the India mobile voice market has hit a plateau, while data services have been sensitive to prices. Additionally, some telcos have current financial debts that will most likely prevent them from investing in service spectrum at this time.
Auction details
This most recent sale is due to a Supreme Court ruling made in February 2012, which stated that 122 mobile licenses established in 2008 across 22 regions had to be canceled as a result of allotment irregularities. Because of this ruling, the released spectrum was to be auctioned to service providers.
Bidders are competing for spectrum in the 1.8 GHz bandwidth in 22 mobile phone service areas throughout the country. In addition, 900 MHz bands in Mumbai, Delhi and Kolkata are also up for sale.
Overall, Indian government officials are aiming for $1.8 billion in profits from the sale of the license sale.
Auction activity
Bloomberg Technology reported that during the first day of the auction, India saw total bids of $7.12 billion. The main competitors in the sale are eight major telecommunications organizations, including Reliance Jio Infocomm, Bharti Airtel and Vodafone Group.
The bidding competition is poised to become intense as the auction continues as both Bharti and Vodafone need 900 MHz licenses to maintain service availability in India’s top mobile phone markets as their licenses will expire later this year.
“These auctions are critical for the incumbents such as Bharti and Vodafone,” Ankur Rudra, Ambit Capital Pvt analyst told Bloomberg. “Reliance Jio’s strategy remains a matter of speculation now. We feel they are looking at making a calibrated entry level rather than a big splash.”
Rajan Mathews, director general of the Cellular Operators Association of India, told Bloomberg that the auction will most likely continue at least until the end of the week.
Securities India Pvt analyst Espirito Santo said that activity by the top bidders shows that the organizations are keeping all options open to enable them to bid across different sectors.
“An analysis of average total minutes per-circle per-megahertz of spectrum suggests to us that telcos are starved for spectrum in four circles and we thinking bidding in these circles is likely to be aggressive,” Santo said.
Indian wireless market
According to Bloomberg, the Indian wireless market boasts 753 million active subscribers, making it the second biggest market worldwide following China. The region also has the most rapidly expanding smartphone market worldwide due to the rise of more affordable devices. As sales of this hardware increases, telecom carriers are responding to growing customer demands by boosting broadband capacity, making the sale of spectrum licenses increasingly important.
In addition to benefiting the service footprint of operators, revenues from the auction will be used to reduce India’s budget deficits, including a 4.8% shortage in gross domestic product.
However, Bloomberg stated that the auction may not live up to the country’s expectations as incumbents including Bharti and Vodafone may limit bids for license renewals. Furthermore, the last spectrum auction in 2012 raised only 25% of the goal due to weak demand and high costs.
