For the industry, the spectrum auction that ended on Wednesday was perhaps the most-flawed of all the recent airwave sales. Even as the industry awaits the Supreme Court to announce the winners and the quantum of spectrum they won, telecom companies are staring at the impending financial implications of this high-cost auction.
In an interview to BusinessLine , Cellular Operators’ Association of India (COAI) Director-General Rajan S Mathews says that structuring a business case would be difficult. COAI, being the industry body representing major players including Airtel, Vodafone and Idea Cellular, has the pulse of the industry. With the bidding parameters set to extract the maximum price from the operators, the overall financial of the industry would be on a decline. Edited excerpts:
It would be too pre-mature to say what the impact would be, as we don’t know who are the winners and the bands they have won. These licences for another 20 years and these prices are gateways for data services. Of course, we expect there would be some consolidation, while we are waiting on hear on spectrum sharing and trading. All of those would have an impact on the industry.
Are you saying that it would not be necessarily a bad scenario for the sector?
The market itself is going to fundamentally alter as the result of the trade-off, because we expect the emergence of larger operators with financial commitments. This is not the end of the auctions, there would be further auctions coming up.
Isn’t the design of the auction a little flawed?
Absolutely, one is that there was a limited quantum of spectrum (put for sale), and two, the auction forced existing operators to fight (take part in the auction) for the business continuity. All across, the bidding parameters ensured to extract the maximum price from the operators.
There is also a buzz that the next round will not see this kinds of enthusiasm? When do you think the next round of auctions should be?
It is always difficult to speculate on the next round of auctions, as the operators continue to renew spectrum.
The next round of auctions would be for 2100 MHz, and we can expect all the 15 MHz to be put on the line and given how much has been spent already, we don’t expect a large appetite.
Will the high-pricing of this auction hit the financials of the winners?
Absolutely, it will fundamentally impact the cost structure and the overall industry is on a financial wane.
No bank is going to lend, unless they are clear about your bills, and how are you going to structure a business case with these numbers.
What will be the impact of the Supreme Court hearing tomorrow?
It’s already before the Supreme Court, and the Court has said it is going to hear all the cases. There are four other cases relating to auction, which are yet to be completed. I will be very surprised if the Court says anything on March 26. That’s my understanding.
Does the auction kind of vindicate TRAI’s stance, which predicted there would be cut-throat competition, especially in 900 MHz?
Exactly, all the things the regulator pointed out – such as cut-throat competition and high-bidding – all of those happened.