Business Standard

Why Bihar was most sort after in 2G auction

Low base price, large migrant population with families back home, better law and order in state attract telecom firms

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It was an ironic twist.  sprung a big surprise in the having the distinction of being the only circle where the final discovered price in the auction was  higher  than the  base price. And four operators were fighting over eleven blocks of 1.25 Mhz spectrum which  included Idea, Videocon, and Telenor.

So why was Bihar so attractive? Well one key reason is the low base price fixed for the circle compared to the revenue potential of this state.  A large migrant population whom the  family at home wants to keep in touch with and the general improvement in the law and order situation have been key factors for making the state an attractive mobile market.

With a base price of Rs 42.51 crore Bihar constituted for only 1.21 per cent of the share of the total base price for an operator getting pan India spectrum. However it constitutes for 4.88 per cent of the country’s telecom revenue, which makes it a very lucrative market. Its share of the total telecom revenue, despite all the problems in the state, is higher than many other circles which include Punjab (3.72 per cent), West Bengal (3.23 per cent ), Haryana (2.08 per cent) , Madhya Pradesh (4.63 per cent),the city of Kolkata (2.56 per cent) and even Kerala (4.34 per cent) to name a few.  

Also it is a market with huge potential  as it has a teledensity of only  46.75 which is the lowest in any state in the country considering  the fact that the average teldensity in the country is at 77.04 per cent . Which simply means there is a large voice market which is waiting to be tapped beyond the 63 million subscribers in the state. Says Rajan Mathhews director general of Cellular Operators association of India: “Bihar circle is very reasonably priced and considering the low tele density there is a large upside especially in voice which is what 1800 Mhz is all about”.        

For instance revenue data till June this year show that for Bharti Airtel  Bihar is the fifth largest market in the country in terms of their revenue and for  Reliance Communications  it is the fourth largest again in terms of revenue.

The failure of  Delhi and Mumbai to attract any bidders was apparent even earlier because of the hefty base price which was imposed for these cities constituting for nearly 40 per cent of the total base price for pan India spectrum though its share in the total telco revenue for the country is just over 15.5 per cent. In Karnataka again it was the same problem which kept away operators- its share of the base price was a high 9.43 per cent but its contribution to the telco revenue pie is only 6.99 per cent.

CHART

  • Bihar constitutes for 4.88 per cent of the overall telecom revenue or the ninth highest revenue earner amongst 22 circles  circles.
  • The base price for the 2G auction was also kept very low constituting for only 1.21 per cent of the overall base price, the seventh lowest amongst the 22 circles.            
  • For Bharti Airtel it is the fifth largest circle in terms of revenue while for Reliance Communications it is at number four.
  • The teledensity in the state  at  46.75 per cen is the  lowest in any state,  which means there is a huge upside.

 

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