Spectrum auction to leave telecom firms deep in debt
23 Mar 2015
The Indian government expects to net a record Rs1--lakh crore ($16 billion) from the intense bidding for the country's latest spectrum auctions; but this will come at the cost of sharply higher debts for telecom operators and probable price hikes for the country's nearly 85 crore mobile subscribers.
Market leaders Vodafone, Bharti Airtel and Idea are paying through their nose to retain existing licences as the auction is expected to conclude this week.
They are also keen to pick up badly-needed new spectrum in a process complicated by the participation of Mukesh Ambani's new cash-rich Reliance Jio telecom venture.
Although the auction continues, the battle for the most expensive and sought-after spectrum has largely been decided, analysts say, following two weeks of frantic bidding that have made this the most expensive competition in Indian telecoms history, easily eclipsing earlier estimates of Rs80,000 crore.
Both Bharti and Vodafone have attacked the government for doing too little to help spectrum-starved operators, but industry figures said the leading players were likely to be satisfied with their spectrum hauls, if not the prices they had to pay to win them, according to a CNBC report.
Telecom operators have been cribbing from before the auction started that the government is deliberately not releasing available spectrum in order to jack up prices and fill its coffers; but this will come at the cost of the consumer.
India's cellphone revolution has occurred mainly due to cheap telephony, apart from the inability of state-owned operators BSNL and MTNL to provide uninterrupted last-mile services particularly in rural areas.
Vodafone, India's second-biggest mobile group by revenue, is set to be the highest spender, investing over Rs35,000 crore to ensure it retains all its existing licences. Idea and Bharti are likely to be the next biggest participants.
Mukesh Ambani's Reliance Jio service, which is due to launch later this year, is investing around $2.3 billion, while Telenor of Norway has also tried to rejuvenate its struggling Indian division, spending roughly $750 million.
The companies declined to comment until the auctions are formally concluded, but analysts said the record sums invested were now likely to leave Indian operators among the most indebted in Asia.
