3G & BWA Auction Analysis

With an application from market leader Bharti Airtel Ltd. (Mumbai: BHARTIARTL) already on the table, and with the deadline for submissions ending today, the remaining, major, privately held Indian mobile operators have all put their names forward to take part in the 3G spectrum auction.
And most have also put their names down for the separate BWA (broadband wireless access) spectrum auction, too. Until this week, that auction looked to be the domain of the WiMax hopefuls. Now, though, there's a mix of potential technologies that could be deployed in the 2.3GHz band, including TD-Long Term Evolution (LTE).
The large international service providers that had been identified as potential bidders for 3G spectrum in India, such as AT&T Inc. (NYSE: T), BT Group plc (NYSE: BT; London: BTA), and Telstra Corp. (Pink Sheets: TLSYY), have not applied.
Foreign interest in India's new spectrum is limited to those companies that already hold stakes in local operators, such as Vodafone Group plc (NYSE: VOD), Etisalat , Maxis Communications Bhd. of Malaysia, which has a majority stake in Aircel Ltd. , and Bahrain Telecommunications Co. (Batelco) , an investor in startup operator S Tel Pvt. Ltd.
In addition, Augere Holdings, which offers wireless broadband services in Pakistan and Bangladesh, has created a new subsidiary to apply for a place in the BWA auction, and one of its financial backers is France Telecom SA (NYSE: FTE).
Rush for 3G
Reliance Communications Ltd. , Vodafone Essar , Tata Teleservices Ltd. , IDEA Cellular Ltd. , and Aircel have all filed to take part in the auction of 3G spectrum, along with minnow S Tel (which only operates in three circles).
New entrants Etisalat DB, which has yet to launch its GSM services, and Videocon Telecommunications Ltd. (a.k.a. Datacom Solutions), which has just launched its first GSM services in the Tamil Nadu circle, have also submitted applications, though it's not known currently whether they have applied to bid in all 22 circles or just in select areas. (See table below.)

Table 1: Applicants for India's 3G Spectrum Auction

Name
   

Number of current mobile customers (at end of January 2010)

Bharti Airtel
   

121.7 million

Reliance Communications
   

96.6 million

Vodafone Essar
   

94.1 million

Tata Teleservices
   

60.3 million

IDEA Cellular
   

59.9 million

Aircel
   

33 million

S Tel
   

0.5 million

Videocon Telecommunications
   

Just launched 2G service

Etisalat DB Telecom
   

Not yet launched 2G service

Source: India's Department of Telecom

And they're all after a limited resource that the operators need to meet the ongoing demand for mobile connections (almost 20 million new lines are being activated each month): In most of India's circles, only three slots of 2.1GHz spectrum are up for grabs in the auction, while a handful of rural circles have a fourth slot. (See India Watch: The Road to 3G to check out what spectrum is being auctioned, and A Guide to India's Telecom Market to find out about India's circles.)
With so many bidders, and at least five operators (Bharti, Reliance, Vodafone Essar, Tata Teleservices, and Etisalat DB) seeking a pan-India license covering all 22 circles (service areas), fierce bidding is expected. According to industry sources, although the reserve price for a pan-Indian license is 35 billion Indian Rupees (US$769 million), bids of more than $1 billion might be required to win slots in the 2.1GHz band countrywide.
Not all of India's mobile operators are applying for 3G spectrum, though.
In line with its strategy to focus more on developing its current voice services, new entrant Uninor , which has signed up a few million subscribers since it launched in December 2009, has not applied. (See Interview: Rajiv Bawa, EVP Corporate Affairs, Uninor and Uninor Launches in India.)
Another relative newcomer, CDMA operator Sistema Shyam TeleServices Ltd. (MTS India), has also decided not to take part in the auction. Loop Telecom Pvt. Ltd. , a mobile operator with 2.7 million customers in Mumbai, has also stayed away from the auction process.
State-owned carriers Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) don't need to participate in the auction process as they already have their 3G spectrum and will be awarded BWA airwaves, too.
BWA auction attracts multiple bidders
As well as applying to take part in the 3G spectrum (2.1GHz) auction, Bharti Airtel, Reliance, Vodafone Essar, IDEA, and Aircel have put themselves forward for the BWA auction, suggesting that they view the 2.3GHz band as useful to deliver data services.
Other bidders for the BWA airwaves include Qualcomm Inc. (Nasdaq: QCOM), which stirred up the market this week with its application, enterprise and wholesale communications giant Tata Communications Ltd. (NYSE: TCL) (sister company to Tata Teleservices), and a number of ISPs. (See table below.)

Table 2: Applicants for India's BWA (Broadband Wireless Access) Spectrum Auction

Name (in alphabetical order)
   

Company type

Aircel Mobile operator

Augere (Mauritius)Wireless Internet service provider (WISP)

Bharti Airtel Mobile operator

Idea Cellular Mobile operator

Infotel Broadband Services Internet service provider (ISP)

Qualcomm Wireless technology vendor

Reliance WiMax WiMax division of Reliance Communications

Spice Internet ISP

Tata Communications Business communications service provider

Tikona Digital Networks WISP

Vodafone Essar Mobile operator

Source: India's Department of Telecom

The list means there are a number of potential technologies being considered for use in the 2.3GHz band. Qualcomm is pushing TD-LTE, while Augere, Tata Communications, and Reliance WiMax all lean towards WiMax. Tikona Digital Networks, meanwhile, uses Wi-Bro to deliver its services in large Indian cities such as Delhi, Mumbai, and Bangalore.
Tata Communications "plans to bid for [BWA] spectrum in all circles," the operator's senior vice president of corporate strategy, Srinivasa Addepalli, tells Light Reading Asia. "Tata Communications considers wireless to be the best option to rapidly increase broadband penetration in India. We will finalize our funding plans for the broadband business, including evaluating the option of a strategic investor, after the completion of the auction."