New Delhi: The government rang a triumphant end to the auctions for high-speed, third-generation (3G) mobile and broadband licences, raising in excess of Rs1 trillion, more than three times the budgeted estimate, giving finance minister Pranab Mukherjee the cash he needs to cut the deficit and keep borrowings from going wildly off target.
Also See 3G and BWA spectrum auction (PDF)
In contrast to the 3G auctions that ended on 19 May, the broadband wireless access (BWA) round ended on Friday with little-known operator Infotel Broadband Services Pvt. Ltd bidding the most for an all-India licence—Rs12,848 crore—and getting snapped up by Reliance Industries Ltd.
The government stands to make a total of Rs34,380 crore from the BWA auction and the money that state-run operators Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam Ltd pay for spectrum they were allocated early last year. The winners have to make their payments within 10 days of the auction ending.
Analysts say the high auction prices may diminish the viability of the broadband services that will be offered.
“The prices for BWA licences have gone through the roof. It will be difficult for companies acquiring licences to justify a business case,” said Mritunjay Kapur, managing director of Protiviti Consulting Pvt. Ltd. “On a pan-India basis, a subscriber base of 55-65 million would be required to build a reasonable business case.”
Companies are acquiring spectrum with the long-term view of using it in various scenarios, he said.
The auction for 3G spectrum netted the government Rs67,715 crore, with the highest bid being made by Bharti Airtel Ltd, which came fourth in the BWA round, behind Infotel, Qualcomm Inc. and Aircel Ltd.
India’s biggest phone company complained that prices were too high, a view it had expressed after the 3G auction as well.
“A combination of scarcity of slots and the auction format, once again, resulted in extremely high price levels,” Bharti said in a release. “The company has secured BWA spectrum in select circles to experiment with new technologies.”
Anil Ambani-promoted Reliance Communications Ltd and Vodafone Essar Ltd haven’t won any BWA spectrum. Officials from both companies said they would focus on wireless broadband through existing technologies that they operate as well as 3G that they have won in the earlier auction.
“We decided to step away from the current BWA auction when prices went beyond rational levels owing considerably to the artificial scarcity of spectrum, with just two slots available and 11 bidders in the fray,” a Vodafone spokesperson said.
Infotel has a connection to Mahendra Nahata of Himachal Futuristic Communications Ltd (HFCL), which famously won mobile phone licences with high bids in the 1990s and defaulted on payments. Infotel is promoted by Anand Nahata, son of the HFCL founder.
The government eventually had to switch to a revenue-share model to bail out the phone companies that had made huge bids for mobile licences.