Indian telecom firms will today begin bidding for the lucrative new 3G spectrum that they say is needed to dramatically improve the country’s mobile services. The auction could potentially raise as much as Rs800bn ($13bn), with established players like Bharti Airtel and Vodafone competing for a slice of higher speed bandwidth. A new entrant into the market, Reliance Jio, will also increase competition, thanks to backing from India’s richest man, Mukesh Ambani.
The auction could potentially raise as much as Rs800bn ($13bn)
The country’s telecom sector has the world’s second largest number of subscribers after China. However, it has not seen the levels of investment in modern technology and high speeds seen in more established markets like the US and in Europe.
The auction is likely to drag on for a number of weeks, with the three leading providers competing for bigger shares of the market. This should drive up the price to around $13bn, but some feel it could even jump to as much as $14bn. Nitin Soni, a director at ratings agency Fitch, told the FT, “It could easily hit $14bn, maybe more. Top operators such as Vodafone and Bharti will be paying anything from $2.5bn to $4.5bn each.”
The telecoms auction comes a week after the first full year budget of the new Bharatiya Janata Party (BJP) led by Prime Minister Narendra Modi. While Modi’s budget has sought to address many of the regulatory obstacles that have held back Asia’s second largest economy for the last decade, some observers feel he hasn’t gone far enough in helping businesses, especially the telecoms sector. This included a more generous reduction in corporation tax than the five percent cut to 25 percent offered to the industry.
Rajan S Matthews, Director General of industry body The Cellular Operators Association of India (COAI), told The Hindu newspaper, “While a few proposals in the Union Budget may help growth of telecom and broadband, overall, the industry’s concerns and submissions have been left unanswered. With the Government’s thrust on the Digital India initiative, a more supportive budget was expected for the telecom sector.”