Bharti Airtel, Vodafone in must-win race for spectrum

Eight mobile carriers are bidding for spectrum in the auction that began on Monday. This is the government's third attempt at auctioning two frequency bands (900 MHz and 1800 MHz) for at least Rs 11,300 crore or $1.8 billion.
Here are the top 10 developments
  1. According to Press Trust of India, so far four rounds of auction have been completed, with bids received in all 22 circles in 1800 MHz and 3 circles in 900 MHz.
  2. It is necessary for Vodafone to get spectrum in Delhi, Mumbai and Kolkata; for Bharti Airtel in Delhi and Mumbai for continuing operations because their licences are expiring in November 2014.
  3. Call rates in India are among the cheapest in the world, but competitive bidding for spectrum may force operators to hike prices. Call prices have gone up since a Supreme Court order revoked permits of some smaller carriers reducing competition. A lot would depend on how much spectrum Reliance Industries wins. The spectrum bands RIL has applied to bid for would enable the company to provide basic cellphone services, which account for more than 80 per cent of industry revenue in India.
  4. RIL, controlled by India's richest man Mukesh Ambani, sits on a cash pile of nearly $15 billion (Rs 93,000 crore at 1 USD= 62 rupee), which gives it an advantage at the spectrum auction over rivals like market leader Bharti Airtel, which had nearly $10 billion (Rs 60,000 crore) in debt as of end-September.
  5. Reliance also owns a nationwide licence for high-speed 4G mobile phone networks, which it won by outbidding rivals in 2010. However, the broadband service under its Reliance Jio Infocomm unit, has not been launched yet.
  6. Other bidders in the auction are Idea Cellular, Reliance Communications, Aircel, Tata Teleservices and Indian unit of Norway-based Telenor.
  7. For 900 MHz band, the base price is 53 per cent lower than the previous auction price. It is Rs 360 crore per MHz for Delhi, Rs 328 crore for Mumbai and Rs 125 crore for Kolkata. For the 1800 MHz band, the reserve price for a pan-India licence is at Rs 1,765 crore per MHz, about 26 per cent lower than in the March sale.
  8. The auction has been necessitated following a Supreme Court order in 2G case directing that all the radio waves freed from the cancellation of 122 licences in February 2012 should be auctioned. Revenues from the new licensing are crucial to bridge the fiscal deficit, which in the first three quarters inched closer to the budgeted target for the whole year.
  9. The previous two attempts (November 2012 and March 2013) were boycotted by major mobile phone operators that complained minimum bid prices were too high. As a result, the government sharply cut the floor bid price for the February auction, helping it lure interest from eight carriers including the market leaders. The Rs 11,300 crore which the government hopes to raise is much lower from 2010 when carriers spent nearly Rs 1.5 lakh crore to buy fast third-generation (3G) airwaves.
  10. The government has also slashed the annual fee on spectrum from 3-8 per cent of revenues to flat 5 per cent. The move will benefit incumbents such as Bharti Airtel and Vodafone, which currently pay around 6 per cent of their revenue in annual fees. The new rate is higher than the 3 per cent flat rate suggested by sector regulator TRAI.

(With inputs from Reuters)


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