Saturday, November 17, 2012

2G Auction 2012: Not a Great Story for India to Share with the World


Following the very poor response, financially and technically, all the blame go to TRAI who recommended Rs 18,000 cr for pan India spectrum. The spectrum auction for 1800MHz later priced for Rs 14000 cr for pan India 5MHz spectrum which is too high for operators who had shelled out money for 3G and 4G spectrum and in high debt. Operators’ bodies – COAI and AUSPI repeatedly told that this price will replicate in negative growth of the sector but regulatory bodies TRAI and DoT did not took them in ears.

The tepid response tells that CAG did miscalculation of Rs 1.76 lakh cr loss on 2008 spectrum sale. They messed up because they took 3G auction as basic, and 3G auction went fierece as operators thought 3G growth story would be same great as 2G were.


Top circles like Delhi, Mumbai did not get a single bidder

Among 5 bidders, only Telewings/Telenor and Videocon do not have spectrum there. These metro circles have more than 100% teledensity, while circles like Karnataka, Rajasthan are near to saturated yet to pricey. This spectrum can be used for 2G (= mainly voice) - so no big revenue earner from it. The market is transformed into something that new operators will not go for a rock bottom tariff to get customers in these circles.



Incumbents went on buying more spectrum

Airtel won 1.25MHz spectrum in Assam only for just Rs 8.67crore. Idea Cellular bidded to own back spectrum in 7 circles (Kolkata, Maharastra, West Bengal, Assam, Jammu & Kashmir, North East and Orissa) it lost licenses. Idea acquired 5 MHz (4 x 1.25MHz) in all 6 circles except in WB It won 5 slots, and in Bihar it won single slot of 1.25MHz. Thus Idea continues its pan India operation.

Vodafone won spectrum in 14 circles - 2.5 MHz in Haryana, Madhya Pradesh, UP West, Assam, Bihar, Jammu Kashmir, Orissa, North East and 1.25MHz in Maharastra, Kerala, Punjab, UP East, Himachal Pradesh.

At a point this move by the incumbents seem to be on the right way as India's telecom sector is often having no clarity on spectrum regulation. As often these three players act as an unit, they can share this spectrum within legal limit.

Videocon wins 6 circles + operation is in full swing in Punjab

Though many thought Videocon Is backed by Reliance Industries and it will go for pan India 2G spectrum, the company did not follow the trend. Videocon wins back 5MHz spectrum in 6 circles - . Videocon’s license in Punjab was not cancelled as it has brand sharing agreement (dual technology) with Quadrant which offers CDMA mobile services under Ping brand. So Videocon will operate in 7 circles in future.


Videocon head Mr. Dhoot said that in future the company will try to enter more circles as govt. of India conducts the spectrum auction.

Telewings or Telenor India wins 6 circles
Telenor, currently operating in 9 circles after scaled down from 13 circles, wins back 6 circles with 5MHz of 1800MHz spectrum on each circle. Out of these 9 circles – Telenor miss Mumbai, Kolkata and West Bengal where it has quite good subscriber base.


Telenor wins Maharastra circle, and it could buy Loop Mobile who has operations in Mumbai. Buying Loop Mobile means Telenor will have a solid network with a subscriber base, but will have to pay for the spectrum.

Post-auction Telenor/Uninor did not send any message to its customers in Kolkata, WB or Mumbai requesting porting out. I don’t told what is boiling inside the company.

Though 1800 MHz spectrum is technology-agonostic Telenor clears the fact that they will not deploy 3G/4G services over this band. Telenor will keep offering affordable voice services. But Telenor is giving a miss to enterprise customers – no postpaid, no 3G, no Blackberry. Like MTS, Telenor must open up for all options even if there is few takers.

No new pan-India player

Currently pan India players include Bharti Airtel, Vodafone India, Reliance Communications (GSM and CDMA), Aircel and Idea Cellular. Tata Tele following withdrawl from CDMA spectrum auction will stop operations in North East, Assam and Jammu Kashmir.

So no new pan India player which means ‘one country one circle’ will be delayed and to offer pan India coverage this new players have to make deal with pan India players.  That means another profit making situation for incumbent players.

Chances of cancelling this auction and conducting a new one

This auction with highly-cricitized prices got lukewarm response. New players - Etisalat DB, STel, Loop Telecom did not bid and exited market. Sistema Shyam also did not, as they are waiting to resolve the issue legally by curative petition. Tata Tele planned to bid for CDMA spectrum later drew up. Anticipated but Reliance Industries also did not participate. Aircel, Reliance Communications and Loop Mobile stayed away.

With poor response from operators the auction gained just Rs 9407.64cr, compared to Govt.'s expectation to generate Rs 40,000 cr. As this amount is to be adjusted by the payment done in 2008 and remaining amount to be paid in installments - i.e. there is much lower payment from the telcos. ET report suggested as the operators have to pay 1/3rd of total payment right now, and the payment to be adjusted with 2008 payment - Telewings, Videocon and Idea don't have to pay in next couple of years. Not only that those who exited market, Etisalat, Batelco may ask for refund of the payment done in 2008.

The Supreme Court of India also asked why all spectrum (by the cancellation of licenses given away in 2008) was not put in the auction. However re-conduct of this auction will be great for neither GoI nor the telecom sector. 

But unsold circles will go for another auction before 31st March, 2013, as informed by Union Telecom Minister Kapil Sibal.

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