PREVIEW-Billion dollar bids seen at India spectrum auction

* What: 3G and wireless broadband spectrum auctions

* When: From April 9

* Nine firms bidding for a maximum of four 3G slots

* 3G licence seen costing up to $2 bln for national cover

* Pick up of 3G services may be slow, tough for firms

By Devidutta Tripathy

NEW DELHI, April 2 (BestGrowthStock) – Nine firms will compete in
a
widely watched airwaves auction in India starting next week
that would pave way for the introduction of high-speed
third-generation mobile services in the world’s fastest-growing
mobile market.

In what could be one of the world’s biggest such auctions
over the past few years, the Indian government hopes to net
revenues of nearly $8 billion from 3G and a near simultaneous
auction of broadband wireless access (BWA) spectrum.

The 3G auction starts from April 9 and two days after it
closes, the BWA spectrum auction will begin. India’s top six
private telecoms operators are bidding for 3G spectrum across
all 22 zones, while three others including Etisalat’s (ETEL.AD: )
Indian telecoms venture will bid in select zones.

Due to limited number of slots for 3G — three each in most
of India’s 22 telecoms zones and four in some — and high
competition for the scarce spectrum, analysts expect each
winning bid to be more than $1 billion for a pan-India licence,
or even touch $2 billion, compared with a base price of $780
million.
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For a list of bidders, see [ID:nSGE62I0FU]

For a graphic on India’s mobile market, see

http://r.reuters.com/cuv25j

For details of the auction process, see

http://r.reuters.com/cux72j
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The auction also comes at a time when operators have
intensified a 2G price war, with per-second charges falling to
around 1/50th of a U.S. cent, eating into cashflows and
margins.

Heavy investments on licences and then on building networks
could further stretch the winning firms’ financials.

“Definitely bidding would be aggressive,” said Kunal Bajaj,
managing director at telecoms consulting firm BDA Connect,
which has local and international firms as clients.

“There is sufficient competition in place. And very
clearly, there’s high risk of losing your high-end, high-ARPU
(average revenue per user) subscribers if you don’t get 3G
spectrum,” said Bajaj.

He sees market leader Bharti Airtel (BRTI.BO: ), Vodfone
Essar (VOD.L: ) and Tata Teleservices [TATASL.UL], which is
backed by Japan’s NTT DoCoMo (9437.T: ), winning spectrum in a
majority of the zones.

Eleven firms, including U.S. chipmaker Qualcomm (QCOM.BO: ),
will bid for BWA spectrum, for which two slots in each of the
22 zones are up for grabs. The base price for a national BWA
licence has been set at around $390 million.

India is a late adapter of 3G and is the biggest economy to
not have these premium services in wide scale yet, though the
state-run telecoms firms have 3G services in some zones. China,
the world’s biggest telecoms market, took a long-delayed 3G
plunge last year by awarding licences to the country’s
top-three phone operators.

Among others, the UK raised more than $35 billion from a
spectrum auction in 2000, while the U.S. government got about
$19 billion by selling spectrum in 2008.

SLOW PICK UP SEEN

Winning operators have to deposit the money within 10 days
of the auction, but they will be awarded spectrum only in
September, meaning there is no immediate opportunity to make
money out of new services such as faster Internet on mobile
phones and video calling that 3G would facilitate.

Also, some argue in a market like India, which is built on
a low-price, high-volume model, there may not be many takers
for luxury services and it would be limited to metros and big
cities. Currently operators make only a tenth of their total
revenue from data services.

A study by telecoms researcher Wireless Intelligence
estimates India will have 60 million 3G users by 2013, which is
less than 10 percent of consultancy Gartner’s forecast of 771
million total mobile phone users by then.

Stock Market Trading

(Editing by Aradhana Aravindan and Muralikumar Anantharaman)

PREVIEW-Billion dollar bids seen at India spectrum auction