How will telecom spectrum auctions work?

How will telecom spectrum auctions work?

New Delhi: India is set to auction wireless telecom spectrum for the first time starting Friday to facilitate nation-wide deployment of 3G and wireless broadband services.

Global investment bank Rothschild and DotEcon Ltd, a provider of telecom auction services, are advising the government on the auctions.

Here is how the auction works and what is in store for investors.

What is the process?

Each of the auctions for 3G spectrum in India’s 22 telecom zones would be a separate but simultaneous process conducted over the Internet.

Bidders have authentication tokens and passwords to access the electronic auction from their own computers. The names of bidders for each service area would not be disclosed during the auction, only the total number of applicants would be known.

The auctions will consist of multiple rounds and at the end of each round, provisional winners will be declared. The auctioneer, Rothschild and DotEcon, will announce higher price for every round and will look for demand at that price.

The auctions end when demand is equal to the number of slots available in each service area.

The auctions would be held from 9 a.m. to 7:30 p.m. on all days except Sundays and national holidays in India, beginning 9 April.

How long will the auctions go on?

Government officials and their advisers say it is difficult to set a timeframe, and could take at least a week to possibly more.

A separate auction for Broadband Wireless Access (BWA) spectrum will start two days after the 3G auctions close.

No deadline has been set for the auctions, a DotEcon official said.

What should investors look for?

Winning 3G spectrum will boost the valuations of companies as it will boost their services and opens up new revenue streams. But aggressive bidding could stretch the companies and weigh on their earnings in coming quarters, leaving their shares prone to wide swings in the near term.

Indian mobile firms Bharti Airtel, owned 32% by SingTel, Reliance Communications and Idea Cellular, which is 15% owned by Axiata, are participating in both 3G and BWA auctions and are bidding for spectrum in all 22 zones.

Indian ventures of foreign telecom firms including Vodafone, Etisalat, NTT DoCoMo and Batelco are also participating in the auctions. US chipmaker Qualcomm is bidding for wireless broadband spectrum in all Indian zones.

The auction will also help global telecom gear makers such as Ericsson, Alcatel-Lucent, Nokia Siemens and Huawei, and handset makers such as Nokia, Samsung, Apple Inc and HTC to further boost sales in India, which is already a lucrative market for them.