Sept. 26 (Bloomberg) -- Reliance Industries Ltd. is likely to bid for Indian mobile-phone spectrum in November as billionaire Mukesh Ambani seeks to complement his broadband business, according to a person with knowledge of the matter.
Reliance, India’s most-valuable company, was among the potential bidders at a meeting in New Delhi with the Department of Telecommunications, which will open the application process for second-generation airwaves starting Sept. 28, the person said, asking not to be identified because the details aren’t public. The auction of licenses, canceled in February after an investigation into their sale in 2008, must begin by Nov. 12.
Entering the auction would mark Ambani’s first foray into India’s mobile-voice services, the world’s largest market after China, since handing over the business to his brother, Anil, when they broke up India’s second-biggest industrial group in 2005. The licenses would supplement the broadband Internet services Reliance plans to offer with the fourth-generation spectrum it purchased two years ago.
“In India you do need to have a basic 2G voice service to attract customers,” said Naveen Kulkarni, an analyst at MF Global Sify Securities India Pvt. in Mumbai. “Customers want a one-stop solution, they want a vendor who can provide them all kinds of services. If an operator only offers 4G data services he may not be able to amass a sizable customer base in the current environment.”
A telephone call and e-mail to Reliance’s corporate communications department weren’t answered. The company’s shares rose 0.6 percent to 844.75 rupees in Mumbai trading.
The telecommunications department must allocate the spectrum by Jan. 11, India’s Supreme Court said in an Aug. 27 ruling. The government faces being charged with contempt of court if the schedule isn’t met, the judges said.
The nation’s highest court canceled the 2G licenses after sales of the permits in 2008 sparked India’s biggest corruption probe, leading to the jailing of the former telecommunications minister. India’s auditor said in 2010 the sale of the airwaves lacked transparency and ineligible bidders bought them at “unbelievably low” prices, denying the treasury of as much as $31 billion.
The Indian joint ventures of Telenor ASA, Emirates Telecommunications Corp. and Russia’s AFK Sistema lost their licenses.
Existing operators will be allowed to buy as many as two blocks of 1.25 megahertz each in the auction of 1,800 megahertz spectrum for global system for mobile communications, or GSM, networks, according to Department of Telecommunications guidelines released July 3. Most of India’s second-generation network is GSM.
New entrants will be required to bid for a minimum of four blocks each of 1.25 megahertz.
In the auction of spectrum in the 800 megahertz band, used by operators that run code division multiple access, of CDMA, networks, three blocks of 1.25 megahertz each will be sold.
Companies that had their licenses canceled are allowed to participate. Idea Cellular Ltd., India’s fourth largest operator by subscribers, is still evaluating whether it will bid for airwaves in seven telecom zones where its licenses were canceled, Managing Director Himanshu Kapania said last month.
India’s cabinet decided on Aug. 4 that operators will have to pay a minimum of 140 billion rupees to buy wireless spectrum in the 1,800 megahertz band.
At that price, “there is no business case” for Idea to bid, Kapania said. Idea has 6.5 million to 7 million subscribers in areas with the canceled licenses.
Reliance, which operates the world’s largest refining complex, started moving back into telecommunications in June 2010 when it agreed to pay 48 billion rupees ($896 million) for control of Infotel Broadband Services Ltd. That deal came hours after Infotel bid 128.5 billion rupees for wireless broadband Internet licenses across India.
Reliance is preparing for an entry into the 4G data services market with an “asset-light approach” and by “forging relationships with global players,” it said in a presentation to investors last year.
Under a 2005 agreement, Mukesh Ambani, 55, kept the family’s petrochemicals, oil and gas units and Anil Ambani, 53, got the power, telecommunications, financial services and entertainment units. The brothers said in May 2010 they were scrapping an accord not to expand into each other’s businesses.
Anil’s Reliance Communications Ltd., India’s third-largest mobile-phone company, on Aug. 11 reported first-quarter profit that missed analysts’ estimates as rising competition and finance costs squeezed margins.
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