Telecom spectrum auction: Mukesh Ambani makes life tougher for Airtel, Vodafone

Airtel, Idea Cellular, Vodafone, Tata Teleservices, Reliance Communications and Aircel are yet to recover from the 3G shock in 2010 thanks to the presence of Mukesh Ambani during the BWA spectrum auction. In 2014, the airwaves are selling like hot cakes, probably due to the billionaire with strong telecom ambitions.

You may read: Spectrum auction on Day 1: complete status report from DoT

3G to suffer after 4G and voice from Reliance Jio Infocomm

If Reliance Jio Infocomm is successful in launching 4G data and voice services, it will further impact the 3G and 2G mobile Internet projects of Airtel, Idea Cellular, Vodafone, Tata Teleservices, Reliance Communications and Aircel, though 3G and 4G are complimentary.

The GSM and CDMA operators did not expect extremely low returns in the last four years after modestly launching 3G in select cities.

You may read: Airtel data ARPU up 7% to Rs 75, voice ARPU up 1% to Rs 161 in third quarter

Though Reliance Industries promoter Mukesh Ambani did not participate directly in the 2010 BWA spectrum auction, airwave price touched the roof. Reliance Jio Infocomm, which bought BWA spectrum from a HFCL firm, did not launch 4G on TD LTE technology. It has 2G plans and voice with data will be a motivating factor for India’s 800 million plus mobile population.

If Indian mobile users can get high speed data along with speed from Reliance Jio Infocomm, it will be a threat to established telecom operators.

Mukesh Ambani and 2G spectrum auction

Telecom vendors to face the music

Is Reliance Jio Infocomm is successful in bagging nation-wide spectrum, Airtel, Idea Cellular and Vodafone will be forced to go slow on increasing voice tariffs — till Reliance Jio hits the telecom market.

Airtel posted an increase in net profit after 15 quarters. This was mainly due to its 3G payments towards spectrum and network roll out costs.

You may read: Mobile internet pushes Airtel Q3 revenue up 13%, profit up 115%

If these three operators are going to spend heavily on spectrum, it will affect their network roll outs. This will not be good news for telecom equipment vendors such as Alcatel-Lucent, Cisco, Ericsson, Huawei, NSN, ZTE, etc. Prices for 900 Mhz bandwidth in Delhi rose about a fifth from the floor price on Monday. Mumbai’s rose 44 percent and Kolkata’s was higher by 39 percent.

In addition, telecom equipment vendors are not hoping for miracle since Reliance Jio is looking for a cost effective roll out of 4G across the country.

Is Uninor active?

The established players need to re-think because Uninor is also in the ring. Uninor, a subsidiary of Telenor, was one of the first telecom operators to launch cost effective mobile packages in India to add subscriber base.

Meanwhile, Reuters today reported that Reliance Infocomm is trying to buy spectrum in both the 1800 MHz and 900 MHz bands. Spectrum in the 1800 Mhz range would enable Reliance to offer voice services and improved coverage for its 4G Internet service. The 1800 Mhz spectrum would complement Reliance Jio’s existing 4G LTE technology as there are 4G networks in other countries using that spectrum band. Getting hold of 900 Mhz does not help in 4G for now and would signal a drastic change in approach.

Government to make money

In the latest two rounds of auctions, the India government could not show its strength due to poor participations from telecoms. Going by the response on day one of the auction, the Congress-lead government, which is fighting to retain power, telecom ministry will achieve its target. On Monday, the government received $7 billion worth of bids and looked set to top its minimum target of raising $1.8 billion initially.

The only beneficiary of the 2010 auction was the UPA government which made around Rs 108,000 crore from 3G and BWA auctions. Hope the year 2014 will be different. .

Baburajan K
[email protected]

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