Vodafone Group Plc and Bharti Airtel Ltd. face an auction to keep using wireless spectrum in India that are set to expire in a year, a sale through which the government seeks to raise 400 billion rupees ($6.4 billion).
Ministers today set the reserve price for 900 megahertz airwaves in capital New Delhi at 3.6 billion rupees. India’s plan to sell Vodafone and Bharti’s spectrum licenses expiring in November 2014 is being reviewed by a court, which is set to make a decision in December.
“They have their rights and we have ours,” Kapil Sibal, the minister responsible for telecommunications, told reporters outside his home in New Delhi. “The auction will happen sometime around January.”
Vodafone and Bharti have been at odds with India over the expiring airwaves, which cover the cities of Mumbai, Kolkata and New Delhi. The companies are pushing for their renewal while the government wants to add to its revenue, leading to the legal spat. The carriers would likely have to spend more than they had anticipated to continue services in the world’s fastest growing smartphone market, said Harit Shah, an analyst with Nirmal Bang Equities Ltd.
Billionaire Mukesh Ambani’s Reliance Jio, his latest foray into Indian telecommunications, may also bid for the airwaves to add to its fourth-generation services expected to start in 2014. “Jio could be the dark-horse and screw everything up for Vodafone and Bharti,” Shah said.
Bharti spokesman Ashutosh Sharma and Vodafone India spokesman Kumar Deep declined to comment on the airwaves, as did Reliance Industries Ltd. spokesman Tushar Pania.
The carriers will be joined by the likes of Idea Cellular Ltd. and Reliance Communications Ltd. in India’s first auction after two sales failed in November and March, raising just 20 percent of Finance Minister Palaniappan Chidambaram’s original target last year. The opening price for spectrum in New Delhi is about one-third the price of the March auction.
India has reserved the right to “tweak” the reserve price as they saw fit, Sibal said.
India has asked the telecommunications regulator to recommend a reserve price for 800 MHz spectrum to be auctioned along with the 900 MHz and 1800 MHz bands. The government has failed to meet its revenue target through spectrum sales since 2010 when carriers spent $25 billion on third-generation airwaves.
The last time India sold spectrum, in March, Russian billionaire Vladimir Evtushenkov’s Sistema JSFC was the sole bidder.
“Established operators need to extend the use of spectrum, which is coming to the end of its 20-year validity. We will see targeted auction activity this time around,” said Mohammad Chowdhury, who heads the telecommunications practice at PricewaterhouseCoopers in India. “Spectrum is their lifeblood to continue operations.”