Game of phones

At 8.30am on February 3, the headquarters of eight telecom firms were buzzing with activity. The junior staff at an operator’s office in Mumbai arrived much earlier than their usual time of 10am to find their top bosses perched anxiously before a big screen, which was connected to the main server at the Department of Telecom. Two extra screens were linked as a backup in case there were technical glitches in the first one.

Miles away in Delhi, three top officials were huddled together in the conference room of another operator’s office. One was practising breathing techniques to control anxiety levels, while another had his eyes closed.

Another Mumbai operator had shrouded its conference room with black curtains to keep out prying eyes. The three executives inside had their mobile phones switched off and were not allowed to leave the room until the end of day.

This was, after all, their big day — spectrum, the lifeline of telecom operators, was on the auction block and their bids could make or break their business.

This scene repeated itself over the next 11 days, until the final results were announced on February 13.

Each day, senior officials arrived in office at 8am and did not leave until 8.30pm, an hour after the auctions wound up for the day. “After close of auction, we had to stay back to prepare the strategy for the next day,” says a CEO involved, who requested his name not be published. Most of them are still “recovering” from the hectic 68 rounds of bidding that fetched the government more than ₹61,000 crore for airwaves that carry telecom signals.

Bharti Airtel, Idea Cellular, Vodafone India, Reliance Jio Infocomm, Tata Teleservices, Reliance Communications, Telewings Communications (Uninor) and Aircel Cellular were the participating companies.

“It is like fighting 22 battles (for spectrum in as many telecom circles) simultaneously, and with more than one enemy. You can only anticipate the moves of the competition, and you are unlikely to guess everyone’s strategy right,” says the CEO.

“You need to know what the other operators are thinking, and how eager and prepared they might be to battle — whether they are strong, average or weak in that market. Even a strong operator will have a different view on different markets,” he adds.

But the exhaustion hardly begins or ends with just the auction. “Preparations begin months in advance, starting with a 20-year business plan for the spectrum on offer and for its use in the 22 circles. This is the most difficult aspect,” says the CEO.

What makes this especially tricky is the fact that companies have to consider the evolution of technology over the next two decades, gauge the industry size, movement of tariffs, and the likely revenue from voice and data. The plan then goes through several rounds of discussion between shareholders, technology experts and the marketing team.

“We have to consider the impact on the business if we win the spectrum, and if we don’t, in which case the competitive scenario has to be forecast,” says the CFO of another telecom company.

According to the notice inviting applications (NIA) for spectrum, while the bid amounts flash on the screen in descending order, the operators’ identities remain unknown. So apart from one’s own bid, each operator is left guessing about the rest.

“We prepared a software based on the rules and the information provided in the NIA, along with the details of spectrum available in each circle. This helped us gauge how many players can be accommodated in a circle given the evolving demand-and-supply situation at every stage,” says the CFO.

When an operator sees that supply is constrained, it tweaks its strategy to back off at an appropriate time and consider alternatives, such as an acquisition at a later date. “The auction is almost like poker, involving betting and individual play. And much like poker, some moves of every operator remain hidden until the end of the game,” says an official at a Delhi-based company, adding, “The operational team decides the best way to expose yourself, while ensuring you don’t give away all your cards.”

But ultimately, as all the operators agree, the auction process is almost like a trap — designed to maximise revenue for the government. No matter how the cards are played, the only winner is the government exchequer.

COMMENT NOW