Billionaire's Spree Seen Undermining India's Airwave Auction

  • Mittal's Airtel spends $1.2 billion on spectrum in past month
  • Purchases aimed at fending off threat from Ambani's Jio

As Bharti Airtel Ltd. prepares for more competition from the nation’s richest man, the government may be bracing for collateral damage.

That’s because India’s largest mobile-phone carrier has bought enough airwaves in the past month to be able to provide 4G services everywhere in the country, reducing Bharti’s need to bid for spectrum in an auction later this year that the telecom regulator is counting on raising 5.4 trillion rupees ($81 billion).

"There is not much they actually need,” Christopher Lane, a Hong Kong-based analyst at Sanford C. Bernstein, said in reference to Bharti. “There is so much spectrum available.”

Billionaire Mukesh Ambani’s Reliance Jio has also been striking deals to make sure it will be able to provide coverage in most of the country when its service debuts this year, leaving fewer players able to bid for airwaves at the prices the government is seeking. Lane said he doesn’t expect the government to be able to auction off its most sought-after spectrum at such "unrealistically high" prices and will likely have to try it again next year at cheaper levels.

The government is planning to go ahead with its spectrum auction in July, Telecom Secretary J.S. Deepak said on Tuesday. Idea Cellular Ltd. will need to spend as much as 120 billion rupees on airwaves, while Vodafone Group Plc may have to spend as much as 160 billion rupees, according to Lane.

Bharti spent $1.2 billion in spectrum deals in the past month, its latest campaign to prepare for Ambani’s Jio, which is spending $23 billion on a wireless service able to vie for the lead in the world’s second-largest mobile-phone market. In an e-mail, Bharti said it won’t comment on spectrum purchases beyond what it already announced in stock exchange filings.

Bharti Airtel shares rose 3.5 percent to 362.45 rupees at 10:01 a.m. in Mumbai. The shares have gained 6.5 percent this year, compared with a 2.3 percent drop in the benchmark BSE Sensex India. Idea’s stock rose 2.8 percent to 116.25 rupees.

Its recent investments have made Bharti the only incumbent carrier to have full nationwide 4G coverage, compared with 61 percent for Idea and 50 percent for Vodafone’s Indian business, according to Vaibhav Dhasmana, a Mumbai-based analyst at Jefferies India Pvt. Ltd.

“The recent spectrum acquisition deals by Bharti have been prompted by the impending entry of Reliance Jio,” said Dhasmana. “It helps Bharti to increase its lead in 4G versus competition and hedges it from the risk of buying the steeply priced" airwaves from the government, he said.

As to Jio, the company has forged spectrum alliances with Reliance Communications Ltd. -- a company headed by Ambani’s younger billionaire brother -- and is in talks to share state-owned Bharat Sanchar Nigam Ltd.’s network. Last month, Ambani said he is investing 1.5 trillion rupees into his Jio mobile phone unit, offering a service that will be 40 to 80 times faster than current average speeds. Reliance Jio didn’t immediately respond to a request for comment.

While no formal launch date has been announced, Ambani had previously signaled a December 2015 start for Jio.

“The longer Jio delays, the longer Bharti has to launch and optimize its networks and lock down its high value customers,” said Bernstein’s Lane.

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