The recently concluded 3G and broadband wireless access (BWA) spectrum auctions were a success, earning the government Rs 1062.62 billion, far in excess of the anticipated Rs 350 billion.
The BWA spectrum auction for two slots of pan-Indian BWA licences of 20 MHz in each circle added Rs 385.4 billion to the government reserves.

In mid-June 2010, the 16-day BWA spectrum auction, which had 11 companies bidding through 117 rounds, fixed the price for a pan-Indian BWA licence at Rs 128.47 billion.

Bharti Airtel, Reliance WiMax, Idea Cellular, Aircel, Augere (Mauritius) Limited, Infotel Broadband Services, Qualcomm, Spice Internet Service Provider, Tata Communications Internet Services, Tikona Digital Networks and Vodafone Essar bid for BWA spectrum. Of these, six companies won the same across the country while only one company, Infotel, won BWA spectrum for all 22 telecom circles.

Qualcomm won in four circles, including the high-profile Delhi and Mumbai metros, paying over $1 billion.
Bharti Airtel acquired licences in four circles for $706 million; Aircel in eight circles for $733 million; Tikona Digital Networks in five circles for $225 million; and Augere of Mauritius in one circle for about $27 million.

Midway through the auction, four leading mobile operators -? Reliance Communications (RCOM), Vodafone Essar, Tata Teleservices Limited and Idea Cellular -? backed out on the grounds that the intensity of bids had driven the price of BWA spectrum “beyond rational levels.”

According to analysts, the 3G and BWA auctions have clearly indicated the real value of spectrum, so much so that even for BWA spectrum, which is expected to be used mostly for data, has fetched multiple times higher revenues than 2G spectrum given out in 2008. This is significant, considering that over 90 per cent of the total telecom revenues in India continue to come from voice. It is, therefore, expected that the telecom sector will be veering away from a voice-dominated arena to more data usage, which will provide a platform for services such as mbanking, m-health and m-education.

In a significant move, which industry watchers suspect will be game changing, Mukesh Ambani-led Reliance Industries Limited (RIL) acquired a 95 per cent stake in Infotel for $1 billion, a day after the BWA auction closed and Infotel emerged as the single winner of a panIndian licence.

Since the feuding brothers Mukesh and Anil Ambani decided to bury their differences in early May, they have gradually done away with most of their non-compete stipulations, paving the way for Mukesh’s return into the telecom sector.

His entry into the broadband space is being viewed by industry watchers as Reliance’s typical aggressive and ambitious move designed to change the dynamics of that space. In fact, RIL has plans of investing about Rs 233 billion over the next two years to complete network rollout of broadband access across India.

“We are betting on the company’s data market,” RIL’s spokesperson stated. RIL has an advantage in this space, being the only player to have spectrum for data services in all 22 Indian service areas. Bharti Airtel has spectrum in 16 circles, Vodafone Essar in nine and RCOM, in 13. The RIL spokesperson added that the company expected cash break-even in its telecom venture in three years’ time.

To kick-start operations, RIL has stated that it would lease passive telecom infrastructure from the existing players including the Anil Ambani-owned RCOM.
Further, RCOM has also expressed willingness to share its infrastructure (including a 200,000 km fibre optic network) and content offerings with RIL.

Analysts feel that though the Ambani brothers have not indicated or responded to any speculation of their combining telecom resources, the improving relations between them could make that happen. This, in turn, would result in the creation of a telecom powerhouse, given their combined spectrum assets and the synergies between their operations.

Meanwhile, winners like Qualcomm are also putting their plans in place. Qualcomm, the US-based chipmaker, plans to divest over a 50 per cent stake in its broadband wireless venture. “Initially, we will divest a 26 per cent stake and in the second phase, we will look at diluting another 26 per cent with a local or a foreign partner. The first deal is likely to be finalised within a month,” said Kanwalinder Singh, president, Qualcomm India and South Asia.

Bharat Sanchar Nigam Limited (BSNL), on the other hand, is unhappy. Though BSNL and Mahanagar Telephone Nigam Limited did not participate in the auctions, they will have to pay the auction price for their 3G and BWA spectrum, which was awarded to them over a year ago. BSNL has already asked the Department of Telecommunications for a refund on 3G and BWA spectrum fees on grounds that, unlike other commercial players, it was given no choice to select the circles where it would make a good business case for 3G and BWA services.

Clearly, with the auctions behind, alliances, acquisitions and restructuring will determine the eventual winners in the dynamic marketplace. Within the next few months, users can expect to see a slew of product launches of wireless broadband devices ranging from phones and laptops to netbooks and iPad lookalikes.
Shampa Bahadur