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3G bids will become more realistic
By siliconindia
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Friday, 08 August 2008, 00:58 IST
New Delhi: The 3G auction will see the participating telecom players ready with the funds but more realistic and calculative. According to the analysts the operators are also expected to quote reasonably so as to make it affordable to the consumers, as reported in Business Line.
"I don't think the operators will bid very aggressively. Indian operators are very realistic and they will learn from the experiences of 3G auction in Europe and elsewhere. They will also learn from the bidding for licenses when the telecom sector was opened up in India in 1990s," says Prashant Singhal, Head of telecom practice, Ernst & Young.
The 3G licenses acquired by the European operators were later waived off by the local government.
India has been one of the earliest adopters of the spectrum auctions. So far, its experience has been a mixed one so far. In 1996, the operators quoted a huge price in the excitement of being the first to acquire a telecom license. One company had bid as higher as Rs 10,000 crore for the Delhi circle alone. The operators experienced a default on payment resulting in the failure of the auction. Hence the government was forced to bail out the operators by adopting a revenue share model.
The bids turned more realistic when auctions were conducted the second time in 2001 for selecting the fourth cellular operator. Despite the fact that there were five to six players in the tussle, Pan- India fourth cellular license has proposed for Rs 1,650 crore. According to the analysts, the operators had gained maturity over the years and would have become wary of bidding very high.
"Indian operators, with their 2G experience and keeping in mind the price elasticity of this market; will be realistic in their bids for 3G spectrum. At the end of the day having to offer affordable services to consumers would play a big role in how much an operator would be prepared to invest in acquiring that spectrum. However, it also depends on the number of slots available. In circles where there are 60 MHz available, the bids are expected to be reflective of the underlying business case but in metros where there is probably space for two or three players, the bids could be aggressive," says Arpita Pal Agrawal, Associate Director, InfoComm Advisory Services, and PricewaterhouseCoopers.
Operators including Bharti Airtel, Reliance Communications, Tata Teleservices, Vodafone Essar, Idea Cellular and Aircel are expected to bid for 3G auction. Foreign players, including AT&T, may also bid but the high entry cost of $1 billion will act as a deterrent. According to the analysts the high entry cost will bring in only the serious players and will also prevent any foreign players from bidding very high.
