As e-auction of telecom spectrum concluded on Wednesday, analysts said the winners faced a piquant situation now as their steep bids will burden their financial state further with limited elbow room to pass it on to customers in the form of tariff hikes.
The auction concluded after 19 days and 115 rounds of rigorous bidding with total commitments at Rs.109,874 crore as per provisional figures released by the government. As many as 50 out of 69 service areas on offer went at a premium.
"The whole auction was designed by the government to extract maximum revenues from the operators. As a result, the industry is going to face financial needs," Rajan S. Mathews, director general of the Cellular Operators' Association of India, told IANS.
Pointing to a key financial indicator, analysts quoted GSM Association's research wing to point out that in India bids were at global levels, but the average revenue per user was already low for Indian operators at $2.55, against $17.65 for Germany, $29.30 for the Netherlands and $28.52 for the UK.
"The spectrum auction outgo will impact on the rollout and quality of telecom network. In this competitive environment, operators will find it difficult to raise data or voice tariffs in the immediate term," said Arpita P. Agarwal, head for telecom with PriceWaterhouseCoopers.
Former telecom minister Kapil Sibal also felt the auction process was flawed.
"The telecom sector is hugely in debt to the extent of Rs.3.4 lakh crore. Now, in paying for high spectrum prices, there'll be no money for investment in infrastructure," Sibal told IANS.
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Analysts said unless the revenue stream for the operators increases sharply, there will be little scope for the players to justify the high bids they have made. But in a regulated tariff regime, they also felt the scope for tariff hikes was limited.
"Prices are within the ballpark region. Price is not a surprise. However, the amount of bidding in the 800 MHz for 4G was not expected. It happened most of the operators are now planning to be a 3G and 4G player," Mahesh Uppal, director of telecom consultancy firm Com First, told IANS.
Uppal, however, cautioned that prices at which the winners got the spectrum were very very high. "It means less money to spend on the growth of network," he added.
Analysts also felt the impact on basic mobile phone services, classified as second generation (2G) telephony, will be impacted the most, as bidding was most competitive in the 900 MHz band - also since some players have to vacate the spectrum in December after the expiry of the licence.
"We participated in the recent spectrum auction to ensure continuity of business and service to our customers. We remain committed to providing seamless connectivity and superior communication services to our customers across the country," Vodafone said in a statement.
But experts saw more auctions in the near future as the current round focused on eight bidders.
"There was strong focus on 2G spectrum in this auction by all bidders. Looking at the current low demand for 2,100 MHz band, there may be another auction for 2100 MHz band soon with more spectrum and revised reserve price," Rishi Tejpal, principal research analyst, Gartner, told IANS.
But is a consolidation on the cards?
The opinion on this is: "Let the norms be set, at least," as PwC's Agarwal said. "With this auction completion, the government should bring back focus and provide roadmap on pending issues of spectrum trading, sharing, guidelines on mergers and acquisitions."
(Aparajita Gupta can be reached at aparajita.g@ians.in)