Spectrum Auction ends

India’s telecom spectrum auction raised Rs.61,162 crore after 10 days of fierce bidding, falling just short of the amount bid for 3G airwaves in 2010 as top operators Bharti Airtel and Vodafone India protected their turf against aggressive newcomer Reliance Jio Infocomm, which won enough frequencies to start offering voice services.
Mukesh Ambani-owned Reliance Jio won a minimum of 5 Mhz of 1800 Mhz bandwidth in 14 circles, including the important ones of Delhi, Mumbai, Kolkata and Karnataka, which will allow it to enter the voice segment to support its 4G data offerings — a development that operators and analysts fear may lead to another rate war. The country’s two biggest operators complained that they were forced to escalate bids to exorbitant levels to retain airwaves in the 900 Mhz band and are concerned that rising debt levels could crimp investment in network expansion. Analysts said the challenge faced by the industry will intensify as companies won’t be able to raise call tariffs to the extent needed to recoup what they pay for airwaves. “The auction in 900 Mhz band resulted in artificial and unrealistic prices on account of shortage of spectrum and the unenviable position of the incumbents, who were forced to bid for this spectrum,” Bharti Airtel said in a statement.

Reliance Jio Infocomm has entered the voice segment for the first time and bought more airwaves for 4G services, this time in the 1800 MHz band in 13 service areas for around Rs.11,000 crore.

The auctions have thrown up four clear winners — Bharti, Vodafone, Idea and Reliance Jio, albeit at a cost. They will be the ones that are best placed to offer both voice and data across the country, possibly leaving some of the other operators looking at exits. While all 46 blocks of spectrum on offer in the efficient but more expensive 900 Mhz band were sold, netting Rs.23,589.6 crore for the government, about 80% of 385 blocks on sale in the cheaper 1800 Mhz bandwidth were taken up for Rs.32,572.6 crore, Telecom Secretary MF Farooqui told reporters. The bandwidth sale started on February 3 and wound up on Thursday.
The winning price in Delhi was Rs.740.96 crore for a Mhz of bandwidth, more than double the reserve price. For Mumbai, it was Rs.563.09 crore, nearly 72% higher than the starting level. In Kolkata, a Mhz of bandwidth went for Rs.194.63 crore, about 56% more than the base price. The winning price in Delhi and Kolkata crossed the 3G price while it fell just short in Mumbai. The pan-India winning level in the 1800 Mhz band was about 7% higher than the floor price.
Bharti and Vodafone, which arguably had the most at stake in these auctions, won back their 900 Mhz holdings that were up for grabs as their permits expire in November. Bharti, which didn’t have 900 Mhz in Mumbai, managed to win 5 Mhz in the lucrative circle. Idea also won 5 Mhz of those airwaves in Delhi. Highpaying data customers make Mumbai and Delhi especially attractive for the operators.

The additional 900 Mhz spectrum that Bharti and Idea got in Mumbai and Delhi, respectively, will allow them to offer premium, highspeed data services in these markets. Reliance Jio will be able to offer voice through the 1800 Mhz spectrum it’s got in 14 circles to support its planned 4G data services.
Vodafone bid the most amount of money — Rs.19,600 crore, of which about Rs.5,600 crore will be paid in the year to March 31. Bharti is to pay Rs.18,530 crore, of which it will cough up Rs.5,425 crore this fiscal. Aditya Birla Group company Idea will pay around Rs.10,400 crore, with an initial payment of Rs.3,100 crore. Reliance Jio bid a total of about Rs.11,000 crore, which translates into an upfront payment of Rs. 3,622 crore.
The third round of auctions has seen the most hectic buying, compared with the earlier two rounds held in November 2012 and March 2013, when bidding was on for only two days. Those rounds failed with the government getting just Rs 9,407 crore, compared with the telecom department’s estimates of more than Rs 40,000 crore.  The government will get at least Rs. 18,296 crore this fiscal itself if all the winners opt for staggered payments, more if some prefer one-shot payments.