The recently-announced reserve price for the upcoming 2G auction in India has failed to create a consensus among mobile operators and telecoms analysts in the country.
While some suggest that Rs140bn (US$2.5bn) for 5MHz of pan-Indian spectrum will not…
The recently-announced reserve price for the upcoming 2G auction in India has failed to create a consensus among mobile operators and telecoms analysts in the country.
While some suggest that Rs140bn (US$2.5bn) for 5MHz of pan-Indian spectrum will not deter potential bidders, others are expressing concerns about the impact of this auction on the telecoms industry as a whole.
A few months ago, two foreign-owned operators, Uninor and MTS, had threatened to pull out of the country after the Supreme Court ordered their 2G licences should be revoked in the wake of the 2G scam. Overall, eight carriers have been impacted by this decision.
In an emailed statement today, Norway’s Telenor declined to comment on whether its JV Uninor would try to re-acquire 2G spectrum.
But it said: “We have always stated that our package of issues includes a deferred payment mechanism, sufficient spectrum in the auctions, no new rollout conditions and a reasonable reserve price. From media reports, it appears that the government is taking some positive steps towards these issues.”
The company added, however, it would need more certainty regarding details of the auction before making a decision about its participation. It also said that it is urging the Indian government to conduct the spectrum sale by the 31 August deadline.
MTS India, which is controlled by Russian telco MTS, declined to comment on the subject.
But according to Mahesh Uppal, director of consultancy firm Com First (India), both Telenor and MTS India will likely take part in the spectrum sale: “Despite prices being higher than in the previous (3G) auction, we still expect some level of bidding in this auction. Telenor and MTS India have a rather large investment on ground and a substantial subscriber base, and they will not want to forego that.”
He, however, added that most operators may not apply for spectrum in all of the country’s telecoms zones. “They will be quite selective about the amounts of spectrum and regions they choose to bid for.”
Pankaj Agrawal, an associate director with Analysys Mason in India, also believes that a certain number of operators will try to buy 2G spectrum. Overall, he expects the auction to bring more stability in the Indian telecoms industry, as “the pressure on tariffs will decrease”.
But it is also expected that operators with weak balance sheets will not be able to apply for 2G frequencies. An industry veteran, who wished to remain anonymous, told TelecomFinance that the reserve price announced by the government was bad news for the entire industry, but declined to comment further.
This is a view shared by Rajan Mathews, director general of the Cellular Operators’ Association of India. He was quoted telling Reuters that the high auction price will hit operators’ margins as they will need to raise a large amount of debt to bid for spectrum.
A final decision by the government on prices was long awaited. Many mobile operators in India had feared they might not be able to take part in the auction after the Telecom Regulatory Authority of India (Trai) suggested, earlier this year, that the reserve price for 5MHz of 800/900MHz band should be set at Rs36.22bn (US$685m).
This would have equated to more than Rs180bn (US$3.25bn) for pan-India spectrum for new entrants, a sharp increase on the amount paid by operators in 2008.
The new auction is scheduled to take place by 31 August, a week before all 122 2G licences are cancelled. But most analysts expect it to be delayed by at least several weeks.
