The Indian government has begun auctioning 2G spectrum in the 900MHz and 1800MHz bands, marking the third time it has attempted to do so in the past 18 months.
The authorities are hoping to rake in a minimum return of $1.8 billion from the auctions.
Previous auctions in November 2012 and March 2013 were scrapped when operators objected to reserve prices that were set far in excess of the spectrum’s perceived value. Just prior to the start of this round of auctions, three of country’s biggest operators made a last-minute attempt to stall them.
Bharti Airtel, Idea Cellular and Vodafone contested the auction as they still hold valid licences for spectrum in these frequencies. The operators claimed the terms of their licences meant that they should not have to compete to reacquire spectrum in circles where they already hold it, such as Mumbai and Delhi. They also requested that their current licences be extended.
However, this petition was thrown out by the Supreme Court, obliging the operators to participate in the auction to reacquire the spectrum. There are 8 bidders overall, including Telenor India and 4G spectrum-holding Reliance Jio Infocomm, which could be positioning itself as a major rival to the market leaders.
Aggressive bidding would allow Jio Infocomm to amass a hoard of spectrum which it could then use to offer voice services. The operator is currently building out a nationwide 4G network, so it could quickly become an appealing prospect for subscribers.
The total amount bid after the first day of the process exceeded $7 billion. The total amount raised by the winning bids will not be revealed until the auctions are over. While analysts have observed that the bidding is unlikely to escalate as it did during the 3G auctions, operators are not underestimating the importance of obtaining 2G spectrum.
Suresh Mahadevan, head telecoms analyst in Asia for UBS, notes that Bharti and Vodafone in particular consider maintaining their foothold in the major cities to be “do or die”, as otherwise their current licences will expire in November this year. Meanwhile, Jio Infocomm’s presence is “something of a wild card” and could spur more frenzied bidding.
