Indian BWA Auction Bid Quadruples - Analyst Blog

India’s Broadband Wireless Access (BWA) spectrum (radio airwave) auction is gaining momentum as the bidding price has reportedly zoomed to a whopping INR72.22 billion (US$1.56 billion) on the sixth day of the auction. This represents a roughly four-fold increase from the floor price of INR17.5 billion (US$377 million) set by India’s Department of Telecommunications (DoT). 
 
The BWA auction began on May 24, 2010, following the closure of the pan-India 3G auction on May 19, 2010, which fetched a staggering INR667.19 billion (US$14.6 billion) in revenues, overwhelming the government’s expectations. At the current bid level, the BWA auction is expected to generate at least INR216.64 billion (US$4.7 billion) in revenues.
 
The DoT is auctioning two blocks of spectrum in the 2.3 gigahertz (GHz) band for BWA in 22 service areas (“Circles"). The regulator has reserved one block for state-run Mahanagar Telephone Nigam Ltd (MTE) and Bharat Sanchar Nigam Ltd (BSNL). Given the aggressive bidding, the DoT has reportedly raised its revenue target from the BWA auction to INR400 billion (US$8.6 billion) from the initial expectation of INR150 billion (US$3.2 billion).   
 
A total of 11 operators are bidding at the BWA auction to grab a chunk of spectrum to roll out the next-generation mobile broadband services in one of the world’s fastest growing telecom market. Limited spectrum and high demand from key circles such as Delhi, Mumbai, Karnataka, Tamil Nadu and Andhra Pradesh have pushed up the bid price.
 
Bidders include local players such as Bharti Airtel, Vodafone’s (VOD) Indian arm Vodafone Essar, Reliance, Idea Cellular, Tata Communications, Aircel and Spice Internet. Others are newcomers Tikona Digital, Infotel Broadband, UK-based wireless broadband operator Augere Holdings and the surprise applicant Qualcomm (QCOM).      
 
Qualcomm’s application is aimed at fostering the rapid deployment of TD- Long Term Evolution (LTE), a 4G wireless broadband standard. The US chip giant intends to partner with an established Indian operator (or operators) following the auction for construction and roll-out of the TD-LTE network. Qualcomm plans to exit the venture later.
 
However, the supporters of WiMax (another leading 4G standard) are lobbying against Qualcomm’s application stating that the chip vendor’s participation in the BWA auction could upset the prospects of the WiMax technology in India.
 
Winners at the BWA auction will be able to launch high-speed mobile broadband services based on the WiMax or TD-LTE standards starting September 1, 2010. While the WiMax technology has been already embraced by operators around the globe, TD-LTE based services are not yet commercially available.
 
The BWA auction is vital for boosting broadband adoption in India. Despite the high teledensity (thanks to the rapid wireless growth), broadband penetration in India is meager with just 9 million users (0.7% penetration) at the end of April 2010, according to the DoT. The scenario should change as carriers roll out blazing-fast broadband services based on the WiMax/TD-LTE standard leveraging the BWA spectrum.
 
Besides wireless Internet, the operators will be able to deliver a range of services such as mobile video, mobile e-commerce, Internet TV and mobile computing, thereby creating opportunity for broadband industry growth.  

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