Indian 3G Bids Cross $1B - Analyst Blog

India’s 3G WCDMA spectrum (radio airwave) auction is gaining momentum as the bidding price reportedly climbed to INR45.8 billion (US$1.03 billion) on the fourth day of the auction. This is roughly 31% above the floor price set by India’s Department of Telecommunications (DoT) at INR35 billion (US$791 million).  
 
The DoT is auctioning 3-4 slots of 3G spectrum in the 2.1 gigahertz (GHz) band in India’s 22 service areas (called “circles"). The limited number of available license slots is propelling the bidding price.
 
After 22 rounds of auction, the Western Indian state of Gujarat surprisingly topped the chart with a bid price of nearly INR4.6 billion ($104 million), exceeding the bid in the key Metro service areas. The lucrative Delhi circle has reached the top among the Metro circles having received a bid price INR4.38 billion ($99 million). Another key circle, Mumbai recorded a bid of INR4.17 billion ($94 million). Four circles are yet to record any bids.
 
A total of nine bidders for 3G auction include major privately-held carriers Bharti Airtel, Vodafone’s (VOD) Indian arm Vodafone Essar, Reliance Communications, Idea Cellular, Aircel and Tata Teleservices, the Indian partner of NTT Docomo (DCM). Five of these participants have bid for the Gujarat circle while Delhi received bids from four carriers.  
 
Winning bidders at the 3G auction have to pay for their licenses within 10 days following the auction closure. Successful bidders will be allowed to launch commercial services from September 1, 2010. Operators have to comply with deployment obligations by covering at least 90% of the metro service areas with 3G within five years from the time of obtaining their spectrum licenses.
 
The DoT will also auction two blocks of Broadband Wireless Access (BWA) spectrum two days after the closure of the 3G auction which is expected to continue for at least another week. The 3G and BWA auctions are expected to fetch INR350 billion (US$8 billion). The Indian government is also planning to auction 4G spectrum soon after the carriers roll out their 3G services.
 
3G services will boost wireless demand in India, driven by the wider access to advanced data applications on handheld devices. Besides, 3G not only offers faster connectivity but will create the market for an array of next-generation devices and value-added services such as internet TV and audio-video calls.
 
The Indian 3G handset market will blossom with the roll-out of high-speed Internet via 3G services from a number of operators. Currently, the country’s handset market is flooded with 3G phones from the world’s leading manufacturers such as Nokia (NOK), Motorola (MOT), Research In Motion (RIMM), LG, Samsung and Sony Ericsson, a joint venture between Sony Corp (SNE) and Ericsson (ERIC).
 
Moreover, Apple’s (AAPL) iPhone 3G is being marketed in India since August 2008 and its follow-up version 3GS was recently unveiled in the country. The entry of private players in 3G connectivity will boost demand for 3G-compatible handsets and accessories as customers upgrade their phones to take full advantage of the data services enabled by 3G. This will significantly benefit leading global handset manufacturers in the world’s fastest growing wireless market.
 

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