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India Phone Companies to Pay at Least $2.5 Billion for Airwaves

Indian mobile-phone operators will have to pay more than 140 billion rupees ($2.5 billion) to buy wireless spectrum in an auction this year.

The country’s cabinet yesterday approved the reserve price for selling the airwaves for a nationwide service in the 1,800 megahertz band, Telecommunications Minister Kapil Sibal said in New Delhi. The Telecom Regulatory Authority of India in April proposed a price of 180 billion rupees, an 11-fold increase over the previous sale.

The cost may hurt operators in India grappling with high debt and low revenue, said Hemant Joshi, a telecommunications analyst with Deloitte Haskins & Sells. Mobile-phone companies in the country have a debt load of $30 billion, even as competition in the world’s second-biggest mobile phone market has reduced tariffs to among the cheapest globally.

“The telecom industry is reeling under tremendous stress due to high debt, banks’ unwillingness to lend and falling revenue,” said Joshi. “These can only be cured with a strategic government policy and not by some poor thought out rebates.”

The nation’s Supreme Court in February canceled 122 mobile-phone licenses in connection with a graft probe into their award in 2008. India’s auditor said in 2010 that the sale of the wireless permits two years earlier may have cost the exchequer as much as $31 billion as they were sold at “unbelievably low prices.”

The local joint ventures of Norway’s Telenor ASA, Emirates Telecommunications Corp. and Russia’s AFK Sistema were among those who lost their licenses. India’s top court set a deadline of Sept. 7 for auctioning the airwaves.

The reserve price for countrywide spectrum in the 800 megahertz band, used by operators that run code division multiple access, or CDMA, networks is set at 1.3 times the 1,800 megahertz price, he said.

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