Source :20 May 2010, 0621 hrs IST,ET Bureau
Four years of delay, 34 days and 183 rounds of frenetic bidding later, the auction of 3G mobile spectrum wound down on Wednesday, delivering an unexpected bonanza of Rs 67,719 crore ($15 billion) for the government’s dry coffers and paving the way for services such as video calling and high-speed internet using phones to be launched across India.
For auction-weary mobile firms already battling a savage price war, the end of the process marks the start of life under a pile of debt that could strain balance-sheets for years, possible consolidation activity or network sharing pacts between operators as losers look to plug service gaps to prevent customers from jumping ship.
The auction failed to throw up a pan-India licence holder. The country’s top two mobile firms Bharti Airtel and Reliance Communications each won 13 of the 22 telecom zones on offer, while other major operators Vodafone Essar, Idea Cellular and Tata won total of 9, 11 and 9 circles respectively.
Bharti, Reliance and Vodafone won the coveted 20-year licences for New Delhi and Mumbai, which account for a lion’s share of the country’s customers and revenues and attracted top bids of Rs 3,317 crore and Rs 3,247 crore respectively, effectively Rs 166 crore and Rs 162 crore per year of the licence period.
The auctions were for a maximum of three operator slots in all but one circle. State-run BSNL and MTNL will be the fourth operator of 3G services. Ministers were thrilled with the outcome, which comes at a time the government is under fire from industry over flip-flops in policy.
“The figures were far beyond our expectations and I am happy for that,” said telecom minister A Raja, who has spent much of the last two years facing accusations that he gave away precious 2G mobile spectrum to a clutch of new operators for a song. Raja promised to release spectrum to all winners by September and said customers could have 3G services by the year-end or early next year.
Will 3G be a money-spinner?
Finance minister Pranab Mukherjee, who had budgeted a total of Rs 35,000 crore from both 3G and WiMAX spectrum auctions, was more ebullient. “It is good... It will give me that much more elbow room,” a visibly elated Mr Mukherjee told reporters. The government has budgeted fiscal deficit at 5.5% of GDP for this fiscal year, and economists are hopeful the spectrum auction proceeds could flatter that number.
But the reaction from mobile operators has been mixed. Industry leader Bharti Airtel, which failed to achieve its objective of a pan-India 3G footprint in the auction, said “the auction format and severe spectrum shortage along with ensuing policy uncertainty drove the prices beyond reasonable levels”.
Doubts exist whether 3G services will prove to be a big money-spinner and ease the pressure on the sector, and some experts cite the experience of developed western markets where 3G services are only now starting to gain traction despite being around for at least five years.
But Vodafone Essar CEO Marten Pieters said he expected strong interest for 3G especially “among the higher value customers, which is a growing segment owing to rising affluence and increasing urban population”.
Gartner analyst Naresh Singh also said the price may be viable in the ultimate analysis. “Obviously, the pricing looks very high, but if you look at 500 million subscribers, 3G has the potential as it can be used for both voice and data,” he said.
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