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Indian Operators Plot Spectrum Auction Moves

Due to get underway next week, India’s biggest-ever spectrum auction is likely to witness some aggressive bidding by players keen to satisfy Indian consumers’ growing appetite for mobile data services. A whopping 380.75MHz of spectrum in the 800MHz, 900MHz and 1800MHz will be up for sale, along with another 5MHz of 2.1GHz spectrum in 17 of India’s 22 circles (service areas).

Experts reckon bidding is likely to be at its fiercest in the 900MHz band. “Existing holders would want to renew at all costs,” says Rohan Dhamija of market-research firm Analysys Mason. “Additionally, some operators that do not have 900MHz and also do not have 3G in certain circles, but have high revenue market share, could bid aggressively for 900MHz in those circles. RJio [Reliance Jio Infocomm] could also look to push up the prices of 900MHz.”

The earnest money deposited (the amount that service providers deposit in the form of bank guarantees) by the participants is also a sign that bid prices could rocket. Earnest money usually ranges from 16% to 25% of the reserve price in a circle, but auction participants have deposited a total of 204.35 billion Indian rupees ($3.3 billion). (See Spectrum Pricing Provokes Jitters in India and table below.)

Table 1: Earnest Money Deposited by Major Players
Service provider Earnest money deposited
Reliance Jio $727M
Bharti Airtel $701M
Idea Cellular $646.9M
Vodafone India $598.4M
Reliance Communications $190M
Telewings $117.2M
Below we assess the specific issues confronting each of these main players.

Reliance Jio
Though yet to launch services, Reliance Jio already owns 2.3GHz airwaves covering the entire country as well as 1800MHz spectrum in 14 circles. Judging by the substantial amount earnest money RJio has deposited, the operator is looking at adding a significant amount of spectrum to its existing holdings during the forthcoming auction. (See Reliance Jio Entry Hots Up Indian Auction.)

Experts believe that RJio could be more interested in the 800MHz and 1800MHz bands than in other spectrum up for sale. “I think 800MHz, especially in four circles where contiguous blocks are available, and 1800MHz will probably be of most interest to RJio,” says Analysys Mason’s Dhamija. “They might also be looking to passively acquire some of RCom’s 900MHz spectrum.”

The company is planning to use a combination of 2.3GHz and 1800MHz spectrum to launch 4G services later this year. And while MTS — which has decided not to participate in the auction because of high reserve prices — was the only bidder for 800MHz spectrum in an auction last year, that band will have attracted RJio’s interest because it is already being used to support 4G services elsewhere.

Bharti Airtel
India’s biggest mobile operator, Bharti Airtel Ltd. (Mumbai: BHARTIARTL) is at risk of losing soon-to-expire 900MHz concessions in the circles of Andhra Pradesh, Karnataka, Punjab, Rajasthan and Himachal Pradesh. Even so, while Airtel needs to renew these licenses, it has already acquired 1800MHz spectrum for these circles in the last auction and would therefore be able to continue offering services even if it fails in its 900MHz mission.

Besides trying to acquire 900MHz in these circles, however, Airtel will also be keen to pick up a decent amount of 1800MHz and 2.1GHz airwaves in preparation for a 4G battle with RJio. Airtel has already launched 4G services in some cities but it will need more spectrum as data consumption increases.

Idea Cellular
Idea Cellular Ltd. has 900MHz spectrum up for renewal in nine circles accounting for about 72% of its revenues. The company is obviously looking to renew licenses in all those circles but is particularly focused on Gujarat and Uttar Pradesh (West), where about 59MHz of its 900MHz and 9.2MHz of its 1800MHz frequencies are being put up for auction.

Idea lacks 3G spectrum in ten circles and 4G airwaves in 14. Moreover, while it holds 1800MHz spectrum it can use to provide 4G services in eight circles, it is not planning a 4G launch before 2017.

Vodafone India
Like Bharti Airtel, Vodafone India also stands to lose licenses in the circles of Kerala, Tamil Nadu, Haryana, Rajasthan, Uttar Pradesh East, Maharashtra and Gujarat. While the company did acquire 1800MHz licenses in a few circles last year, it desperately needs to acquire spectrum in Maharashtra, Tamil Nadu and Uttar Pradesh East if it is to continue offering services in those areas. Besides trying to procure 900MHz spectrum in these circles, it might also try to pick up 1800MHz or 2.1GHz spectrum as alternatives.

Indeed, the high amount of earnest money that Vodafone has deposited indicates the operator might bid for additional spectrum in a number of bands.

Reliance Communications
Reliance Communications Ltd. needs to buy back 900MHz spectrum in the seven circles of Madhya Pradesh, West Bengal, Himachal Pradesh, Bihar, Orissa, Assam and North-East. The operator failed to secure any spectrum in these circles in last year’s auctions, which means that it must procure spectrum if it is to remain in business in those areas. However, similar to Bharti Airtel, it also has the option of buying 1800MHz spectrum in these circles to continue offering services in them.

Telewings (Uninor)
Uninor , trading as Telewings, has been continuing with its strategy of offering “Sabse Sasta” — the cheapest tariff — in the six circles where it operates. Last year, it acquired 1800MHz spectrum in Assam as well as additional spectrum in Uttar Pradesh East, Uttar Pradesh West, Andhra Pradesh, Bihar and Jharkhand. Telewings has previously focused on voice and in this auction would be looking at acquiring spectrum to launch data services.

Though aggressive bidding is expected, the service providers would do well to recall the lessons from the 2010 auction, when relentless bidding led to huge debts for the industry. The operators should be wary of repeating the same mistakes.

http://www.lightreading.com/mobile/spectrum/indian-operators-plot-spectrum-auction-moves-/d/d-id/714077

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