)
With telecom companies (telcos) gearing up for a fierce battle for control of spectrum in Delhi and Mumbai, the Centre is set to garner at least half of the targeted Rs 30,000 crore from the auction in the two cities in January 2014, purely based on the base price.
The auction is expected to witness a lot of action because incumbent operators such as Bharti Airtel, Vodafone and Loop will have to rebid to retain 8 MHz out of the 900 MHz spectrum, which they have to give back to the government in the next year when licences expire. Those expected to join the party include Bharti, Vodafone, Loop, Videocon, Reliance Jio, MTS and Telenor, among others.
With incumbent operators who do not have the 900 MHz band (which is more efficient than 1,800 MHz) in the two cities also likely participate in the auction, analysts say prices could go up by 30-40 per cent from the base price
Control over more spectrum in the two key markets is key for any operator, especially with the market moving towards data usage. For Vodafone, the two markets constitute one-fifth of its total revenues and for Airtel, 14 per cent of the total revenues. The two incumbent operators control over 64 per cent of Delhi revenues, while they have around 50 per cent revenue share in Mumbai. The two markets together constitute over 11 per cent of the total telcos' revenues of the country.
Based on the assumption that auction price fixed by the empowered group of ministers (EGoM) will be the final price, one-fourth of the revenues from the auction in the 1,800 MHz band will come from the two cities alone. The two cities will garner Rs 4,256 crore (if 10 MHz of spectrum is offered for auction) out of the total Rs 17,647 crore that is expected from selling this spectrum.
In the 900 MHz band where 15 MHz of spectrum is up for auction in the two cities, the government is expected to garner Rs 10,306 crore.
Experts say the dependence on Delhi and Mumbai for the upcoming auction will be even higher as competition will be very high in these two cities. "Established operators need to extend their use of spectrum which is coming to an end after 20 years, so there will be targeted auction activity. Aggressive bidding will take place only in Delhi and Mumbai," says Mohammad Chowdhury, leader (telecom), PWC India.
Says Ankita Somani, analyst at Angel Broking: "The success of the forthcoming auction depends on Mumbai and Delhi circles, as they account for a majority of the reserve price. I don't expect much demand except in these two cities."
Some analysts say aggressive bidding will add premium to the reserve price in the upcoming auction. "I expect bid price to be 30-40 per cent higher than the reserve price," says Mahantesh Marilinga, senior research analyst at Finquest Securities.
The battle for 1,800 Mhz is also expected to heat up in these two cities, primarily pushed by the two incumbent operators. Telcos say even if they win back 5MHz in 900 Mhz , they will have to compensate for the loss of 3 Mhz by buying spectrum in the 1,800 Mhz band, to ensure that their services do not get impacted.
