Telcos step up demand for 2G, ignore 3G

Via The Economic Times | Mar 09, 2015

Four days into what's shaping up to be India's largest spectrum auction, the ord
er of battle is clear. Top telcos are determined to hold on to 2G spectrum that'
s back on sale at the end of licence terms, likely ignoring 3G despite operators
having raised a clamour for it before the auction began. Meanwhile, the CDMA ba
nd has seen surprising, albeit limited, interest. A top government official said
that while there is still "demand for the 2G spectrum in the 900 MHz band", som
e airwaves in the 2G bands of 1800 MHz and 800 MHz (the latter traditionally use
d for CDMA), apart from the 3G band of 2100 MHz "could go unsold". This contenti
on was backed by a wide range of executives and analysts that ET spoke to in an
exercise aimed at getting a clear look behind the scenes of an auction that coul
d transform the industry. "It has been a no-holds-barred contest in the 900 MHz
band. Idea and RCOM (Reliance Communications) are already under the gun," said a
n executive at a company involved in the auctions. The 900 MHz band price has al
ready escalated by more than 65 percent from the reserve level, pushing overall
bidding levels to a total Rs 86,000 crore by the end of day four. In the Februar
y 2014 spectrum auction, total bids crossed Rs 50,000 crore in four days. In the
current auction, this milestone was passed in the first day, illustrative of th
e bidding intensity.
The fact that 3G is not as aggressively being pursued despite only a limited qua
ntity of the spectrum being put on sale could be a reflection of the reserve pri
ce, said brokerage HSBC, while CLSA added that more of the airwaves could be off
ered next year. "The muted interest in the 2100 band (3G) highlights that telcos
want the government to revisit the reserve price," HSBC said. CLSA said operato
rs are focusing on 900 MHz as another 3G auction is likely early next year, with
a greater quantity of spectrum expected to be on sale. However, once the 900 MH
z battle is resolved, fresh hostilities could break out over the 2100 MHz band,
said Prashant Singhal, partner at EY. "Tatas are adding incremental spectrum in
this (3G) band, but Vodafone will come in once 900 MHz is settled. It has alread
y made a few initial moves," one person said. "Bharti is likely to look at it as
well, but hasn't moved on it so far." Bharti Airtel, Vodafone India, Idea Cellu
lar and RCOM have been bidding to keep themselves in play in circles where the l
ucrative 900 MHz band that they use is back on the market as permits expire. Bes
ides, Airtel and Vodafone are trying to take away 900 MHz from Idea and RCOM, pu
tting them under pressure in circles such as Bihar and Uttar Pradesh (West). If
any of them lose in these circles, their spectrum, subscribers and revenue poten
tially go to a rival, altering the market scenario dramatically.
(Gulveen Aulakh in New Delhi contributed to the story.)
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