The exit of Vodafone Essar, Reliance Communications (RComm) and Idea Cellular from the just-concluded broadband wireless access (BWA) auctions is a clever move, according to analysts. A combination of scarcity of slots and the auction format, once again, resulted in extremely high price levels which would not have been viable for the telcos. However, they had a prior experience from the 3G auctions which they used wisely to bid selectively.
?There is no immediate demand for BWA in India and also infrastructure or devices are not available. At such price and with telcos? balance sheet already stretched due to heavy 3G payouts, BWA would not have made sense. The service will take around four to five years to settle down. BWA spectrum winners are soft targets and can also be acquired easily after considering the technology uptake in India,? said Rahul Gupta, senior manager?global wireless practice, Strategy Analytics India. Bharti Airtel and Aircel secured four and eight slots, respectively.
?We decided to step away from the current BWA auction when prices went beyond rational levels owing considerably to the artificial scarcity of spectrum with just two slots available and 11 bidders in the fray,? said Vodafone Essar in an email statement.
The BWA auction which lasted for 16 days,?ended with a pan-India winner, Infotel Broadband Services, who paid Rs 12,850 crore for 22 circles.?The auction also contributed a total revenue of Rs 38,543.31 crore to the government.?It’s a clever move that telcos stuck to their forte. Aircel has got BWA spectrum in eight circles and it has 3G spectrum also in these circles. Bharti has got spectrum in four circles, compensating for circles where it did not get 3G spectrum,? said Gaurav Dixit, analyst, CARE.
Aircel, which has secured BWA spectrum in eight circles, said it has bid conservatively only in the areas where it already had 3G spectrum. ?This would help us to save 20-25% on the incremental capex costs. We are geared up for providing end-to-end solution suite of services to large corporates and disearning individuals,? Aircel COO Gurdeep Singh said.
RComm had exited BWA auction a week back. It said auction prices exceeded its business case estimates. ?There is significant difference between revenue attrition and revenue protection. 3G was a revenue protection game and thus aggressive bidding made sense. In BWA incremental opportunity is limited and being an untapped market, it does not provide revenue protection to the telecom operators. With Infotel amadant on one slot per circle, out of total two on auction, aggressive bidding without returns in next year or two would have been negative for operators,? said an analyst on the condition of anonymity. Bharti said it has secured BWA spectrum in selected circles to experiment with new technologies for a total consideration of Rs 3314.36 crore.