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India's Auction of 2G Spectrum gets Poor Response

Added on Nov 15, 2012 by John Ribeiro

The auction of 2G spectrum in India that ended Wednesday will earn the government about one-quarter of what it had planned, reflecting industry concerns about the high cost of the spectrum and the saturation of the country's mobile market.

At the closing of the auction of the 1800MHz spectrum, the Indian government is likely to earn 94 billion rupees (US$1.7 billion) Communications Minister Kapil Sibal told reporters in Delhi. This was far lower than earlier expected revenue of about 400 billion rupees from the auction.

The spectrum was auctioned following a decision in February by India's Supreme Court to cancel 122 2G licenses and auction the spectrum, after it found that there had been irregularities in the allotment of the licenses.

Among the companies that lost licenses as a result were the Indian joint ventures of Etisalat, Sistema and Telenor. Telenor decided to bid in the auction, while Sistema said it would take the legal route to recover the licenses it lost. Etisalat did not participate in the auction.

But response to the auction of the GSM spectrum has been lukewarm with only five companies bidding and no new foreign entrants. The two bidders for CDMA spectrum in 800MHz opted out earlier, and in the auction for the 1800MHz spectrum that started Monday, bidders did not bid for GSM licenses in some key states and cities.

The Indian market is already reaching a plateau and price wars have cut into profits of operators, which may have led to the muted interest in the auction, analysts said.

Five operators including the country's largest, Bharti Airtel, the Indian units of Vodafone and Telenor, and India's Videocon Industries and Idea Cellular participated in the auction.

Telenor said late Wednesday that it had been informed by the government that it secured spectrum in six service areas in India. The company is transferring the business from its earlier joint venture to a new venture with another Indian partner. The company had 22 licenses before they were ordered canceled by the court.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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