Airwaves Sale Set to Draw Weak Bids as India Price War Saps Cash

  • Government spectrum auction targets sales of $84 billion
  • Mounting debt, intensifying competition weakening carriers

Indian Airwaves Sale Set to Draw Weak Bids

India’s plan to raise a record 5.6 trillion rupees ($84 billion) via an auction of mobile-phone airwaves will face headwinds as a price war for subscribers saps the finances of the carriers preparing to bid.

Wireless providers including Bharti Airtel Ltd., Vodafone Group Plc’s Indian unit and Reliance Jio Infocomm Ltd. will probably bid for only 10 percent, or about $8 billion, of the spectrum on offer, New Street Research estimates. Credit rating agency ICRA Ltd. forecasts bids of as much as $9.7 billion, citing a 41 percent increase in Indian telecom industry debt since March 2014.

"It’s a difficult call as the telecom space is very competitive and voice revenues are very stressed," K.K. Mital, vice president at Venus India Asset Management Ltd., said by phone from New Delhi. "Companies are laden with high debts which might compel them not to bid aggressively.”

Airwaves in several bands are set for the auction, which begins Saturday, as India seeks to raise money and improve services at the seven competing mobile-phone providers that have registered to take part. Expectations of tepid bidding come as the nation’s 12 wireless companies work through more than $60 billion in debt and as more customers replace voice calls with apps that use data plans, crimping revenue.

“We expect the unsold spectrum to be reauctioned in 2017 with slightly lower reserve prices, but still not low enough for a clearing price to be found,” analysts led by Chris Hoare at New Street Research, wrote in a report dated Sept. 23.

Vodafone earlier this month said it had injected 477 billion rupees into its India unit, the nation’s second-largest carrier, to expand its network and participate in the auction.

Based on the ICRA and New Street Research estimates, the auction will draw the lowest in total bids in at least three years. Last year’s auction generated $18 billion, and one held in 2014 raised $9.8 billion.

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