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Telcos likely to bid lower in 2G re-auction

Mobile service providers might bid more conservatively in the re-auction of 2G spectrum as high debts squeeze rivals amid fierce competition for customers.

Written by ENS Economic Bureau | New Delhi | Published: February 4, 2012 1:30:32 am

Mobile service providers might bid more conservatively in the re-auction of 2G spectrum as high debts squeeze rivals amid fierce competition for customers.

Industry sources said on Friday that service providers faced a different climate compared with the 3G auction in 2010,when they were seeking to expand their networks quickly and subscriptions were growing apace.

The 3G auction earned the government nearly Rs 68,000 crore. Kunal Bajaj,a consultant at Analysys Mason,said: “Operators will pay much less than in the 3G auction. With less cash and falling margins,they will have to be much more rational about their bidding.” Service providers will be more careful about which circles they bid for. With revenues per user falling for voice-and-data services,larger players will focus on the more lucrative ‘A’ circles including the metropolises,a company official said. “Why should I go to rural markets where if I invest Rs 100 each month,I get Rs 10?” the official asks.

He did not reveal details of his company’s bidding plans but said it would focus on where it was short of spectrum and subscriptions were growing at an attractive rate.

“The bidding price will depend on whether you need the spectrum in the service area and the new policy of the government on spectrum pricing,” he said.

Operators like Airtel,Vodafone and Reliance Communications are relatively constrained by spectrum in metropolitan areas like Delhi and Mumbai. Companies with the most revenue will hold an advantage in the re-auction with many smaller rivals crippled by debt. This is likely to reduce the government’s revenues from selling the airwaves,another analyst said. “Operators will drive a hard bargain. They’ve had enough of paying so much and won’t bend over backwards to pay

high prices for their spectrum… They’ll want to be careful

that they don’t overbid,” the analyst said. Bajaj said the government’s reserve price would not influence the revenue it earns from the auction. “The technology allowed on the airwaves,the size of the band chunks,the duration that the allocation is valid will help determine the price.”

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