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Bharti, Vodafone retain control over 900 MHz spectrum

Vodafone, Idea to offer 4G services using 1800 MHz spectrum

After 10 days of aggressive bidding by telecom companies, the government garnered an estimated Rs 61,162.22 crore from the auction of 900-MHz and 1,800-MHz spectrum, which ended on Thursday. As telecom companies have the option to pay for the spectrum in instalments, the Centre will get Rs 18,296.32 crore this financial year, about 61 per cent higher than the Budget target of Rs 11,343 crore, according to MF Farooqui, secretary, Department of Telecommunications.

The government has been able to sell the entire 46 MHz of spectrum in the 900-MHz band in three circles - Delhi, Mumbai and Kolkata - and 79.75 per cent of the 385 MHz in the 1,800-MHz band across 22 circles.

Following the auction, the telecom sector is set to have two new players in the 4G space, with Vodafone and Idea Cellular announcing they planned to offer 4G services using 1,800-MHz spectrum in select circles. While Bharti Airtel already offers 4G services in a few circles, Reliance Jio, which has 20 MHz of pan-Indian spectrum in the 2,300-MHz band, is set to roll out these services across the country this year.(See also Table below)

In a statement, Bharti said spectrum in the 1,800-MHz band, coupled with the existing 4G spectrum, would help it offer 4G services across all the 22 circles in the country. Just two companies - Bharti Airtel and Vodafone India - will account for more than 60 per cent of the government's overall earnings from the spectrum auction. Vodafone will pay Rs 19,600 crore, the most, while Bharti Airtel will pay Rs 18,530 crore. Reliance Jio Infocomm, the new kid on the block, secured 79 MHz of 1,800-MHz spectrum in 14 circles, which it can use for both 2G voice, as well as 4G data services through the next 20 years. The company will have to spend Rs 11,064 crore for the spectrum it has acquired.

Operators paid the most for the Delhi circle, for which 16 MHz was sold (Rs 11,855 crore), followed by Mumbai (16 MHz sold for Rs 9,009 crore). The spectrum in Kolkata fetched Rs 2,724 crore. Overall, the government secured Rs 23,590 crore through the sale of 900 MHz across the three circles.

From the 2G spectrum auctions, the government's total earnings were 61 per cent more than the value of the entire spectrum being auctioned at the reserve price (Rs 37,903 crore), and about 20 per cent more than the earnings from the 3G auction in 2010 (20 MHz sold for Rs 50,968 crore).

Through the deferred payment mode, telecom companies will have to pay 25 per cent of the entire bid amount for the 900-MHz band and 33 per cent of the bid amount for the 1,800-MHz band in the first year. The remaining amounts will be paid in instalments, through the next few years.

In the 900-MHz band, Delhi was the most sought-after circle, with prices increasing 106 per cent to Rs 740.96 crore, compared with the original reserve price of Rs 359.65 crore. Prices also increased in Mumbai (71.9 per cent) and Kolkata (55.3 per cent) compared to the reserve price.

In the 1,800-MHz band, the price rise in Assam was the highest (about 400 per cent).

"Bids were aggressive, but not irrational," said Jaideep Ghosh, partner, KPMG India. Any major impact on companies was unlikely in the immediate future, as most incumbents had already planned for the auction, he added.

Besides securing spectrum in circles where Bharti and Vodafone's licences in the 900-MHz band are due for renewal this year, both the companies, along with Idea Cellular, have also bought spectrum in circles where their 900-MHz licences will be due for renewal next year, as well as the subsequent one.

Vodafone, which had decided to stay away from 4G so far, said it would offer 4G services in Mumbai, Delhi, Kolkata, Karnataka and Kerala, which accounted for about 50 per cent of the company's data revenue. "We have opened the door to the next generation of mobile technology, 4G, by acquiring 1,800-MHz spectrum in the places where we expect this market to take off. Vodafone Mumbai is the only operator in India to have data capabilities," said Marten Pieters, managing director & chief executive, Vodafone India.

Bharti Airtel, which acquired a total of 115 MHz spectrum for about Rs 18,530 crore, said it planned to roll out high-speed 4G networks in various circles using the FD-LTE technology in the 1,800-MHz band, besides the TD-LTE roll-out in the 2,300-MHz band, giving it a pan-India 4G footprint.

"Future auctions should ensure more spectrum in the 900-MHz band is secured from other agencies and operators who are grossly underutilising this important spectrum band. The auction also highlights the urgent need for vacating E-GSM spectrum in the 800-MHz band, being used for older technologies or lying unused with certain agencies," said Gopal Vittal, joint managing director and CEO (India), Bharti Airtel.

Idea Cellular, which acquired 900-MHz spectrum in Delhi and 1,800-MHz airwaves in 11 circles, said it would offer 4G services using the 1,800-MHz band in eight circles - Kerala, Maharashtra & Goa, Andhra Pradesh, Karnataka, Madhya Pradesh & Chhattisgarh, Punjab, Haryana and the Northeast.

Telewings, which runs the Uninor brand, picked up top-up spectrum in four circles and fresh spectrum in Assam. "Uninor is now well positioned to continue on its growth path through offering affordable mobile services to even more customers in India, both in existing circles and in Assam, where we believe the Uninor model fits very well," said Sigve Brekke, head of Telenor, Asia.

Responding to the auctions, Rajan Matthews, director-general of Cellular Operators Association of India, said: "We are glad the auctions are over and we feel the government has emerged as the real winner.

While the industry is relieved at the conclusion of the auctions, there is disappointment at the winning price points. It remains to be seen if the operators will have the financial resources to invest in networks and marketing after bearing the high spectrum costs." However, he added there wouldn't be any immediate impact on rates.(See also Table below)

Total-spectrum won in MHzTotal outgo
Rs crores
Outgo this year Rs crores
Company 900MHz1800 MHz 900MHz 1800 MHz 900MHz1800 MHz
Bharti Airtel 1897 8642 9906 21563269
Vodafone India 2346.6 112618319 2815 2745
Idea Cellular 559.8 3705 6969 926 2300
Reliance-Jio Infocomm- 79- 11064 - 3651
Telewings Communications - 13.4 -845 - 279
Aircel -8.2 - 210- 69
Rcom- 0.6- 163- 54

From Business Standard

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