New Delhi: Vodafone Group Plc’s Indian unit was the biggest spender at an auction of airwaves that ended Thursday with the government raising a fraction of the Rs5.6 trillion ($84 billion) that it had sought.
The world’s second-largest mobile phone market raised Rs 657.9 billion as several carriers shunned the sale to preserve cash amid intensifying competition in the industry. Vodafone, the nation’s second-largest operator, bid Rs202.8 billion to increase its mobile broadband coverage to 17 regions in India, the company said in a statement. Bharti Airtel Ltd., the largest service provider, said it bought Rs142.4 billion of spectrum.
No bids were received for spectrum in the 700 megahertz band that had the highest minimum price.
“The lack of enthusiasm was majorly due to its unrealistic pricing, high debt and single-digit growth that the industry is currently reeling under,” said COAI, an industry lobby group, in an e-mailed statement. “On many an occasion, COAI has raised the issue of the high reserve price on the band, and how this could affect investor interest during the auction.”
The tepid bidding came 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. Airwaves that weren’t sold can be re-auctioned in future at a lower reserve price. For the government, the miss will tighten the squeeze on what is Asia’s widest budget deficit.
Credit rating company ICRA Ltd. had forecast bids of as much as $9.7 billion, citing a 41 percent increase in Indian telecom industry debt since March 2014. Airwaves in the 2,300 megahertz band sold out as telecom operators spent to increase their fourth-generation mobile broadband services.
Third-ranked Idea Cellular Ltd. said it had added airwaves to enable it to offer mobile broadband in most of the country. Reliance Jio Infocomm Ltd., India’s newest carrier, said it spent Rs137 billion.
The government will get an upfront payment of Rs320 billion, Communications Minister Manoj Sinha said in New Delhi. Unsold spectrum will be auctioned in future, he said.
Airtel, controlled by billionaire Sunil Mittal, slid 3.25 percent as in Mumbai, while billionaire Kumar Mangalam Birla’s Idea was little changed changed. Mukesh Ambani’s Reliance Industries Ltd. — which began offering mobile services last month under the Reliance Jio brand — fell 3.85 percent.
“With the spectrum auctions done, one risk to the industry is behind us,” Morgan Stanley analysts led by Vinay Jaising said in a report Friday. “Rising competitive intensity is the key risk and drives our cautious view on operators.”