In continuing our analysis on the likely outcome of the Spectrum Auction based on Economics Prudence rather than Fairy Tales told in an Oligarchic setup, let us see how 1800MHz spectrum auction will likely span out.
1800MHz Spectrum Efficiency
With Airtel aggressively expanding 4G LTE to multiple cities and rolling out high speed fiber optic network and increasing CAPEX in back-haul, it is safe to conclude Data traffic is exploding in India. 1800MHz is largely used for 2G Voice [though mobile broadband is also possible, but BWA LTE with 700MHz and 800MHz has higher synergy] and the only potential likely bidder is Reliance Infotel; has sent feelers that it is unwilling to be the 14th Operator in the already cut-throat market place, but you never know. There is a high possibility of auction not succeeding in all the circles – particularly Mumbai and Delhi which account for 39% of the total reserve price of Rs 140 bn. Our Bottom 16 Theory for Spectrum Auction holds good in 1800MHz as well.
What Happens if Auction Fails ?
Auction will not fail completely, but in some circles due to high reserve price. In such a scenario,
- Regulator is most likely to revise down reserve price; re-conduct auctions
- Future regulatory payment for existing operators reduces;
- The number of operators and thus the competitive intensity remains high in future
- Strengthens the viewpoint that loss to the exchequer was not high
What Happens if Auction Succeeds ?
- Winning price acts as a benchmark for refarming & renewals
- Operators’ regulatory payout remains high in future
- Strengthens CAG’s (Comptroller and Auditor General of India) claim of 2G loss to the exchequer
Adding to Telecom Operators woes is the Surprise Component of Interest on Deferred Payments of Spectrum mentioned by DoT in the Information Memo. DoT is silent on what this rate of interest would be, and (2) full upfront payment or pre-payment of one or more installments. More Clarity will emerge after the meeting between DoT and Industry. stay tuned.