Bid mark up of 416% crowns Assam as top mobile hotspot

The spirited bidding for the state did not involve any government-owned company but was made by the private sector ones.

New Delhi | Published: February 16, 2014 3:16:21 am
Spectrum sale: Jammu & Kashmir, MP, and Maharashtra circles rank high among bidders. Spectrum sale: Jammu & Kashmir, MP, and Maharashtra circles rank high among bidders.

Through the just concluded telecom auctions, India’s top companies have shown what they estimate are the new growth hotspots in the country.

And these are startling estimates. On top of the list is Assam followed by, Jammu & Kashmir. Coming up behind them are Maharashtra minus Mumbai region, and Madhya Pradesh. At the heart of these estimates are the results of the bidding by each of the eight telecom companies. In the past two weeks, these companies fought 68 rounds of a bruising bidding war for the 22 circles that roughly comprise the entire India.

For each of those circles these companies including Vodafone, Reliance Jio, Bharti and Idea had come armed with statistics on how they will perform in the next 20 years. Their estimates will be major tips for companies in a host of other sectors including FMCG about the income potential from them.

Compared to the reserve price set for Assam, the companies bid up the actual price by a massive 416 per cent by the time the auctions concluded. Sure, the initial or reserve price was lower compared to other states yet it was kept low based on the current state GDP and per capita income of the state.

The spirited bidding for the state did not involve any government-owned company but was made by the private sector ones, which felt confident of the potential to provide returns for such high investment. No state saw such a high mark up.

The other surprise was Jammu & Kashmir. While the bids for economic war horses including Karnataka and Tamil Nadu remained flat the price companies paid for J&K rose a sharp 22 per cent from the base level.

Remember the companies were under no compulsion to buy any of the circles each of which roughly coincided with the state boundaries. (Since the smaller North Eastern states form one circle, the number is slightly less than the number of states in India) For each of the circles, the companies kept on putting in money to the government for the right to provide telecom services.

This is a potential that even the most optimistic Central or state government agencies have not uncovered so far. The most positive implication of this price war is that they are not based on any resources the states can provide other than its people and their economic enterprise. For instance, the companies have not made the bids based on the mineral reserves available in the state or the extent to which they think the political culture is pliable. Their revenue model is only based on how much the people of each state will talk or surf the net.

It will be naïve to imagine the states have been bid for heavily since they were low priced fruits. No matter how low, the companies had no reason to buy additional spectrum to expand capacity unless they believed those could provide returns over and above the cost of their investments. They could have walked away, instead. For instance look at the low interest for North East minus Assam.

There are more such surprises in the bidding pattern. The bidders calculated that Maharashtra minus Mumbai is even better than Gujarat and have paid a 68 per cent mark up against 66 per cent for the latter.

The surprising aspect of Gujarat is that it is the only one among the highly urbanised state for which the companies have held such robust expectations. Prices have just not moved in Kerala or Andhra Pradesh.

Such remarkable difference is also visible in the expectations among the companies about the two segments of Uttar Pradesh.

The eastern segment of the state, including Raebareli and Amethi has been flat. The reserve price has inched up by only 5 per cent. But bidders have sent the price of UP West up by a huge 53 per cent. This region geographically excludes the National Capital Region but even then is seen to be rich picking.

And after the final bids were counted, it is obvious that the revenue potential for Madhya Pradesh is about the same as for West Bengal, minus Kolkata.

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