Bharti, Idea Slump After Topping Bids in India Airwaves Sale

Bharti Airtel Ltd. and Idea Cellular Ltd. slumped in Mumbai trading after agreeing to pay the most for wireless airwaves in India’s record 1.1 trillion rupee ($18 billion) auction.

Bharti dropped 5.8 percent to 376.5 rupees, its biggest decline in 19 months, for the worst performance in the benchmark Sensex index. Idea fell 4.6 percent to 172.3 rupees.

Idea, which had the most airwaves up for auction, bid 303.1 billion rupees while Bharti agreed to pay 293.1 billion rupees, Communications Minister Ravi Shankar Prasad told reporters in New Delhi on Thursday. The companies were bidding for spectrum they already use as they try to fend of billionaire Mukesh Ambani’s upstart operator Reliance Jio Infocomm Ltd.

“Idea will be the worst affected by the auction as it will limit its ability to generate free cash flow and capex investments,” Nitin Soni, a director with Fitch Ratings in Singapore, said by e-mail Friday. “We believe that telcos are likely to raise headline voice tariffs in response to high spectrum prices.”

Proceeds from the 19-day sale that concluded Wednesday exceeded analyst estimates and the government’s target.

Bharti is India’s biggest carrier while Idea ranks third. No. 2 Vodafone Group Plc agreed to pay 259.6 billion rupees, according to the government.

Court Challenge

Almost 40 percent of the spectrum at the sale was in the 900 megahertz band, one of the most coveted for voice calls because signals travel farther and require fewer towers to be built.

India’s Supreme Court, which is considering challenges to the auction procedures, on Thursday allowed the government to complete the sale process and gave it seven working days to submit the names of the winning bidders and how much they agreed to pay. The list of winners will be subject to final court approval with the next hearing set for April 16.

Depending on the band, carriers will have to pay as much as 33 percent of their final bid within 10 days of the auction’s conclusion, according to government guidelines. Operators can pay the rest in 10 annual installments starting in 2017. The permits will be valid for 20 years.

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