India spectrum auction postmortem: where it all went wrong

india spectrum auction
AVN Photo Lab /

India’s largest ever spectrum auction closes with 40% of the airwaves on the shelf, and making less than one-eighth of target government revenues

Critics of the high reserve prices imposed for India’s largest ever spectrum auction have been justified. The sale ended after just five days with 40% of the airwaves unsold, and with the government netting only INR657.8b ($9.8b), rather than the targeted INR5.6 trillion ($83.9b).

Largely left on the shelf were the supposedly “beachfront” 700-MHz licences, as well as 900-MHz spectrum. In a country of intense competition and rock-bottom ARPUs, the reserve prices proved too much for most operators, and the push for more Treasury income could, once again, deliver a setback to India’s hopes of significant mobile broadband progress.

The huge auction was offering a total of 2,354 MHz of spectrum across the 700-MHz, 800-MHz, 900-MHz, 1.8-GHz, 2.1-GHz, 2.3-GHz and 2.5-GHz bands. Seven companies – Bharti Airtel, Vodafone, Idea Cellular, Tata Teleservices, new entrant Reliance Jio, Reliance Communications (RCOM) and Aircel took part.

Vodafone was the biggest spender, buying frequencies in all its markets for a total of  INR202.8b ($3b). It gained 2 x 82.6 MHz of FDD and 200 MHz of TDD spectrum across the 1.8-GHz, 2.1 -GHz and 2.5-GHz bands and now has 4G spectrum in 17 of India’s telecoms operating circles.

In a research note ahead of the auction, analysts from Jefferies wrote: “The most important legacy from this auction must be that Vodafone accumulates enough resource to be competitive in 4G, not leaving itself open to risk of chronic high end customer loss.” They thought Vodafone might have to spend far more – up to INR300b – to achieve its goal but after the auction judged that the operator have secured its “crucial objective of securing enough spectrum to be competitive in 4G”.

Bharti acquired 173.8 MHz in the 1.8-GHz, 2.1-GHz and 2.3-GHz bands for a total of INR142b ($2.12b), which finally gives the country’s largest MNO 3G and 4G spectrum in all of India’s telecoms operating circle.

Jio paid INR136b ($2.03b) for 269.2 MHz in the 800-MHz, 1.8-GHz and 2.1-GHz bands. All the operators have their eyes on Jio, which has been building a nationwide 4G network in 2.3-GHz spectrum and has also been adding other assets to its horde of airwaves. Its commercial launch has been much-delayed but it is now starting to roll out services, and threatening to intensify the Indian price war with disruptive offers and extensive use of Wi-Fi.

“We have expanded our spectrum footprint thereby significantly enhancing capacity of our all-IP data strong network and ensuring world class services for all Indians,” said Mukesh Ambani, chairman of Jio’s parent firm Reliance Industries. “RJio is committed to taking India to global digital leadership by bringing the power of data to all Indians.”

Idea Cellular spent INR127.9b ($1.9b) to acquire 349.2 MHz in the 800-MHz, 2.1-GHz, 2.3-GHz and 2.5-GHz bands while Tata invested INR40b ($590) on licences in Mumbai, where its existing concessions will soon expire. The remaining $400m was spent by Aircel and Rcom.

The high reserve price – INR114.9b ($1.7b) per MHz – meant all the operators passed on the 700-MHz licences, despite their perceived importance for supporting affordable wide area deployment of LTE. Many focused instead on the more affordable 2.5-GHz spectrum, which in other countries round the world has often been a second-stage band as operators move from wid area coverage to increased capacity.

This is the third major auction within five years in which high prices have resulted in lower than expected interest among operators.

This article was first published on Rethink Wireless.

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