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Thomas K Thomas

New Delhi, Aug 4 Even as telecom players are readying funds to participate in the 3G auction, analysts feel that the operators may not quote astronomical sums given that ultimately they have to make it affordable to consumers.

“I don’t think the operators will bid very aggressively. Indian operators are very realistic and they will learn from the experiences of 3G auction in Europe and elsewhere. They will also learn from the bidding for licences when the telecom sector was opened up in India in 1990s,” says Mr Prashant Singhal, head of telecom practice, Ernst & Young.

In Europe, operators quoted $30 billion for acquiring 3G licences, which was later waived off the by local Governments.

While India has been one of the earliest adopters of spectrum auctions, its experience has been mixed so far. In 1996, operators in their enthusiasm to get a telecom licence for the first time quoted huge sums.

One company had bid as high as Rs 10,000 crore for Delhi circle alone. Therefore auction turned out to be a failure, with operators defaulting on their payments. The Government was then forced to adopt a revenue share model to bail out the operators.

However, when auction was conducted a second time in 2001 for selecting the fourth cellular operator, the bids were more realistic. Pan-India fourth cellular licence went for Rs 1,650 crore despite the fact that 5 to 6 players were in the fray. Analysts said that the operators have gained maturity over the years and would be wary of bidding very high.

“Indian operators, with their 2G experience and keeping in mind the price elasticity of this market, will be realistic in their bids for 3G spectrum. At the end of the day having to offer affordable services to consumers would play a big role in how much an operator would be prepared to invest in acquiring that spectrum. However, it also depends on the number of slots available. In circles where there are 60 Mhz available, the bids are expected to be reflective of the underlying business case but in metros where there are probably space for 2 or 3 players, the bids could be aggressive,” says Ms Arpita Pal Agrawal, Associate Director, InfoComm Advisory Services, PricewaterhouseCoopers.

Operators including Bharti Airtel, Reliance Communications, Tata Teleservices, Vodafone Essar, Idea Cellular and Aircel are expected to bid for 3G auction.

Foreign players, including AT&T, may also bid but the high entry cost of $1 billion will act as a deterrent. Analysts said that this would bring in only serious players and also prevent any foreign players from bidding very high.

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