Indian 3G Auction to Make $11B - Analyst Blog

India’s 3G and broadband wireless access (BWA) spectrum (radio airwave) auctions are expected to earn more than INR500 billion (US$11.2 billion) in revenues, based on recent information from the country’s Department of Telecommunications (DoT). This represents a marked increase from the government’s previous revenue expectation of INR350 billion (US$7.8 billion).

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 bids. The DoT will also auction two blocks of BWA spectrum two days after the closure of the 3G auction.

A total of nine bidders for the 3G auction includes 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).

The 3G spectrum bid prices has reportedly climbed to INR79 billion (US$1.78 billion) after the hammer fell on the thirteenth day of the auction. This is roughly 126% above the floor price set by the DoT at INR35 billion (US$785 million).

After 76 rounds of bidding, the lucrative Delhi circle topped the chart with a bid price of nearly INR10.82 billion ($243 million) followed by another key circle Mumbai with a bid of INR10.8 billion ($242 million). The Western Indian state of Maharashtra emerged as the third most expensive circle, recording a bid of INR7.69 billion ($172 million).

The victorious 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 of obtaining their spectrum licenses.

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 has been 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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