Spectrum auction to witness tough fight

The spectrum auction will witness a tough fight as telecom companies will resort to aggressive bidding to secure their positions, a move that could also lead to an increase in operators’ debt positions. Further, for the users, this would lead to tariff hikes as the auction unfurls on Wednesday.

The Department of Telecommunications, India’s telecom licensor, will kick-start the biggest-ever spectrum auction on Wednesday, expecting to garner at least ₹82,000 crore. The Centre plans to sell of spectrum in 800 MHz, 900 MHz, 1800 MHz and 2100 MHz bands.

‘Do or die’ situation “In some of the circles for some of the operators, it’s a ‘do or die’ situation as operators whose licences expire are likely to put up a tough fight. The operators who don’t have 1800 MHz spectrum to fall back on when their 900 MHz band expires have win spectrum in at least one of these bands for continuity of operations,” Rishi Tejpal Singh, Principal Research Analyst at Gartner, said.

On this basis, Bharti Airtel would be in a much “relaxed position” compared with Idea Cellular and Vodafone India, even as the industry expects the major bids to be from the top four, including Reliance Communications.

With the price wars long forgotten, an aggressive bidding also means that the operators would look at hiking tariffs for spectrum acquisition.

Tariff hike on cards “Telecom companies have been contemplating a tariff hike for some time now. An aggressive bidding would mean a much higher of spectrum and it’s unlikely the already burdened players absorbing the impact,” a Mumbai-based analyst, who declined to be identified, said.

The hikes would come in both voice and data tariffs, he added.

Most of the spectrum coming up for auction is being held by Airtel, Vodafone, Idea and Reliance Telecom. Overall there are 29 licences in 18 circles, expiring in 2015-16, that are coming up for renewal.

However, many differed on expectations on tariff hikes.

“The cost of spectrum would not be incurred by every player in the country, as only some of them would be winning spectrum.

“So, it might be difficult for the winners to hike prices,” said Shobhit Khare, telecom analyst with Motilal Oswal Securities.

The industry also fears there might be a disruption by Reliance Jio Infocomm, wireless arm of Reliance Industries Ltd.

“Looking to provide voice over internet protocol service over LTE networks, Relaince Jio might bid for more 1800 MHz spectrum,” an official with an operator said.

“By and large, we expect a good response in the auctions. The investment sentiments have changed and companies are now looking for opportunities,” said Kishor Ostwal, chairman and Managing Director at CNI Research.