in the air
That doesn’t bode well for the government, which needs money for salary increases taking effect this month. A payout of about 849 billion rupees is due to 10 million workers and pensioners, and Prime Minister Narendra Modi’s administration expects about 31 percent of non-tax revenue to come from communication services in the fiscal year through March.
An auction falling short of expectations would tighten the squeeze on what is Asia’s widest budget deficit, according to data compiled by Bloomberg.
Last year’s auction generated $18 billion, and one held in 2014 raised $9.8 billion.
“Carriers have already accumulated debt from bidding in past auctions,” said Harsh Jagnani, vice president for corporate ratings at Gurgaon, India-based ICRA. “If they bid for more spectrum, it will increase their indebtedness and that will constrain their financial flexibility.”
dea Cellular, the third-biggest carrier, is cautious about bidding after responding to Ambani’s challenge by offering as much as 54 percent more data for the same price. The company views the auction as a way to upgrade its coverage and add customers.
“You’ve got such a large competitor coming in with such deep pockets that it’s bound to shake up the industry,” Idea’s billionaire chairman, Kumar Mangalam Birla, said in an Aug. 11 interview. “We’re hoping that we’ll fill in the gaps that we have in our spectrum but one has to wait and see what auction prices are like.”
Telenor ASA, which ranks eighth among carriers, won’t bid because proposed spectrum prices “do not give an acceptable level of return,” the Oslo-based company said in its second-quarter earnings report July 19.
Improving coverage is crucial as more Indians text, watch videos, shop and bank via their mobile phones. India will have an installed base of 600 million smartphones by 2020, International Data Corp. estimates.
Smartphone shipments in India increased by 15 percent in the second quarter from a year earlier, compared with 3 percent globally, according to Counterpoint Research.
Some carriers already topped up on spectrum before the auction. In March, Bharti Airtel announced it was acquiring airwaves from a unit of Videocon Industries Ltd. in six areas, and a month later followed with a deal with Aircel Ltd. for spectrum in eight areas. Bharti Airtel declined to comment on the upcoming auction.
“We’ve moved from a spectrum shortage to a spectrum glut,” Himanshu Kapania, chief executive officer at Idea Cellular, said at an Aug. 9 earnings press conference.
Yet not all carriers are sitting out. Vodafone, India’s second-largest, may be the biggest spender at the auction. The carrier, which is preparing to go public, may spend as much as 163 billion rupees, Bernstein estimated, to boost scanty 4G service.
The carrier will bid for spectrum, Sunil Sood, the managing director of Vodafone India, said without elaborating.
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