Spectrum Auction 2014 – Pre-Bid Conference, Battle for Contiguous Blocks – Idea Cellular to Bid – Part -1

Our Associate in New Delhi attended the Department of Telecom (DoT) pre‐bid conference on the 20th December 2013. It was an eye opener as we get a sense that serious long‐term players will bid for contiguous 5MHz spectrum to complete or improve their data foot‐print while fringe players will wait for more clarity on M&A guidelines.

Idea Cellular representatives clearly indicated that whole‐hearted participation in the Jan-2014 Telecom Spectrum Auction will be contingent on an “All or Nothing” [More on this in the next part] option for participants bidding for 5MHz contiguous spectrum (essential for wireless broadband service launch).

In the absence of 2100 MHz spectrum auctions, incumbents could look to bid for 1800MHz spectrum to enhance their data footprint in circles where they don’t have 3G presence. [3G in 1800Mhz Band is feasible but No Handset / Gear Eco-Systems Exist yet. 4G-LTE, Yes for both – Handset & Gears Exist] The following table shows how much money – Airtel, Idea, RCom, Vodafone, etc would require to complete PAN India 3G Footprint by winning 5 MHZ Contiguous block

Case for Separate auction for Contiguous Block is Made:
Some participants indicated separate auctions should be conducted for contiguous and non‐contiguous spectrum. By design of Auction rules, operators will bid for blocks of 200KHz in the 1800MHz band and 1MHz in MHz band (minimum bid of 3 blocks in 1800MHz band and 1 block in 900MHz band) & in cases where demand exceeds supply, operators might win end up winning less than the desired 5MHz, which will be disastrous for operators planning to launch 3G /4G LTE Wireless broadband services.

Operators Demand On Spectrum
Harmonization – Participants indicated that harmonisation of the current spectrum held by operators should be carried out to provide more contiguous spectrum for better auction participation.

Liberalization – The current auction norms for liberalization of existing spectrum are not very clear as criteria on rollout obligation and SUC charges need more clarity.

Demand for Flat Spectrum Usage Charges Except Reliance Communications, everybody demanded that the DoT revert to Flat SUC ir-respective of the spectrum one holds. DoT panel indicated that they are studying the TRAI recommendations and will revert back on the issue.

We believe that the auction will see very limited participation for additional spectrum for voice services. Stay tuned more updates following.