India’s Telecom Commission Sets 2,100 MHz Spectrum Prices Above Regulator’s Recommendation

India’s Telecom Commission—the highest decision-making body in the Department of Telecommunications—has set the price for bidding in the country’s upcoming 2,100 MHz band spectrum auction at INR 37.05 billion (US $604.2 million) per MHz. This price is 36 percent higher than the price of INR 27.2 billion (US $443.6 million) that was recommended by the Telecom Regulatory Authority of India (TRAI). In addition, the Telecom Commission has agreed to auction only 5 MHz of spectrum and not the additional 15 MHz that are also available due to spectrum that has been freed up by the defense ministry. Much larger blocks of spectrum in the 800 MHz, 900 MHz and 1,800 MHz bands will also be auctioned at prices that the government has also set to be higher than the regulator’s recommendation. India’s government wishes to raise between INR 80 billion (US $1.3 billion) and INR 1 trillion (US $16.3 billion) from this auction. The auction, which was originally scheduled to take place in February, has been pushed to 4 March. While India’s Department of Telecommunications did not specify the reason for the delay, it could be caused by the lack of agreement as to the price of spectrum, particularly in the 2,100 MHz band.

As we have previously written, India’s government wanted to raise INR 40 billion (US $652.3 million) in the country’s 2014 spectrum auction, but it actually garnered under INR 10 billion (US $163.1 million). It appears that with the present auction, as with the one in 2014, India’s government is only considering maximizing revenue as a factor to determine the base price for bidding. While the government has a deficit to reduce, it should have no reason to believe that taking this route of high reserve prices would have any more success than it did in the past. But keeping spectrum prices low might be more in the interest of the country’s telecom sector. India’s very large mobile market has a lot of potential to grow and to enable the country’s MNOs to expand their networks and increase services because lower spectrum prices will result in the MNOs having more money for infrastructure investment. It has become clear that in developing nations, the growth of the telecom sector adds to the growth of the country’s overall economic status, mainly because in these “mobile first” countries mobile broadband enables internet access as a means of conducting business in many industries. The Telecom Commission may also want to take note of TRAI’s warning against the higher prices because it may also result in the operators not presenting any bids.

“Developing nations in particular should consider many factors when setting reserve prices for spectrum auctions. As smartphones are becoming more affordable in these countries and users are seeing the value of data use, operators need to build out their networks to be able to provide more coverage and better service. The growing mobile sector in these countries will help to drive their economies upward, and governments should be mindful of affording operators ways to upgrade infrastructure.”

Jamie Davella,

Research Analyst at Tarifica

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: http://www.tarifica.com/contactus.aspx

American Tower Corporation Explores M&A Options in India

American Tower Corporation (ATC), a U.S.-based global provider of mobile telecommunications infrastructure, is exploring the possibility of acquiring India’s largest tower operator, Viom Networks, which is controlled by Tata Teleservices and has over 40,000 towers. ATC currently owns more than 12,000 towers in India and wants to expand its presence there.

As of year-end 2013, ATC had almost 28,000 towers in the U.S. and over 39,000 in 12 international markets. Its desired expansion into the Indian market could more than double the number of ATC’s towers outside of the U.S. India has the world’s fastest growing smartphone market due in part to the size of the country’s population and also because of the country’s development potential, both in terms of devices and infrastructure. Year-over-year smartphone adoption in India increased by 84 percent in Q2 2014, and further adoption seems very likely, as 71 percent of the market still uses feature phones. Furthermore, rural India still lacks strong network infrastructure.

ATC is venturing that in addition to operators upgrading existing infrastructure—as Bharti Airtel and Aircel did when they launched 4G services in some areas in India—there will also be a need for new towers as several of the country’s telecom operators start to show signs of expansion. Reliance Jio, which will launch 4G service across India early in 2015 as a broadband wireless access license holder, will need to have a large number of new towers built as opposed to upgrading existing infrastructure. ATC hopes Reliance Jio’s 4G launch will induce India’s other MNOs to accelerate their 4G service rollouts, which up until now have been proceeding at a sluggish pace. As 4G adoption becomes more widespread in India, data demand will increase. To satisfy customers’ needs, all of the country’s operators will need to add more towers to their networks in addition to upgrading existing sites. While many pieces of the puzzle, including tower purchases by Indian operators, need to fall into place for ATC to recoup its investment in the country, it appears that the timing is good for the infrastructure provider and that India’s mobile operators will also benefit from ATC’s move.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:  http://www.tarifica.com/TarificaAlert.aspx