Infotel Broadband Services emerged as the sole pan-India winner in the auction of broadband wireless access (BWA) spectrum. The auction that concluded today yielded revenue of Rs 38,617 crore for the government.
The total revenue from auction of both 3G and BWA spectrum reached Rs 1,06,336 crore — over three times the estimated revenue of Rs 35,000 crore.
Infotel would pay an amount of Rs 12,847.77 crore for acquiring BWA spectrum in 22 circles.
Apart from Infotel, US-based chipmaker Qualcomm secured BWA spectrum in the premium Delhi and Mumbai circles.
Qualcomm would pay Rs 4,912.54 crore for four circles, including Kerala and Haryana. Bharti Airtel would pay Rs 3,314.36 crore for winning the bids for four circles – Maharashtra, Karnataka, Punjab and Kolkata.
However, major service providers Vodafone Essar, Reliance Communications and Tata Communications exited the auction due to high prices and limited number of slots. Idea Cellular did not win the bid for any circle.
“The company decided to step away from the current BWA auction when prices went beyond rational levels, owing considerably to the artificial scarcity of spectrum with just two slots available and 11 bidders in the fray,” Vodafone said.
Echoing similar thoughts, Reliance Communications, which exited BWA auction a week back, said auction prices significantly exceeded its business case estimates. Tata Communications also said the winning bids were in excess of what the existing broadband business cases can support and seem to reflect the effects of perceived scarcity of spectrum combined with limited number of slots being auctioned.
Interestingly, barring the Karnataka circle, Bharti had not won 3G spectrum in remaining three circles. The company, however, maintained that a combination of scarcity of slots and the auction format resulted in extremely high price levels once again. There is no restriction on technology companies to provide services for wireless broadband, be it WiMax or its rival Long Term Evolution Time Division Duplex (TD-LTE) technology.
Analysts, however, expressed fear that such steep BWA prices could lead to high rates for consumers.
“Of course, the bid price (of BWA auction) is very high, which will lead to high tariffs. There is no business case for a pure Wimax player. If players take a calculated risk and wait for next-generation Long Term Evolution (LTE) technology, there will be value in paying such high prices for BWA spectrum,” said Prashant Singhal, analyst at research firm Ernst & Young.
Another analyst said operators should look towards launching LTE technology, which would have faster speed than Wimax. In LTE, the operators would also be able to offer voice services. But the technology would be available commercially in the next 2-3 years.
“The prices will be high initially, but as soon as demand picks up, tariffs will become affordable,” the analyst added. It is estimated that the Wimax industry would grow to $3-4 billion over next 4-5 years.
There were 11 bidders in the fray for the auction of two slots of BWA spectrum. Aircel, in which Malaysia’s Maxis Communications has a majority stake, won the bids in eight circles at Rs 3,438.01 crore. The eight circles are Andhra Pradesh, Tamil Nadu, West Bengal, Bihar, Orissa, Assam, North-east and Jammu & Kashmir.
Tikona Digital Services bagged spectrum in five circles – Himachal Pradesh, Rajasthan, UP (east), UP (west), Gujarat – at Rs 1,058.2 crore. Augure won the bid in one circle (Madhya Pradesh) at Rs 124.66 crore.
State-owned BSNL and MTNL, which have been given BWA spectrum ahead of the private players, will have to pay the equivalent of the winning bid in each service area. BWA spectrum would offer high-speed internet access as well as internet telephony and TV services. It can also be used for voice and high-speed data services.
The payment for wireless broadband access, according to analysts, is one of three events that are exerting pressure on the liquidity system. 3G spectrum fee payment and advance tax payments outgo by June 15 are the other two factors causing strain.
“Whether telecom players take loans for paying fees to government or use internal resources, the fact is money is going out of system. It could be in the form of bank resources or current account of companies”, a treasury executive with a large public sector bank said.
