India is auctioning spectrum for mobile wireless services for the third time starting Monday, after reducing the minimum price for access to the airwaves.
The government's previous attempts since 2012 to raise money through the auction had few takers as some potential bidders were deterred by the high floor prices set by the government.
The response of bidders this time is likely to be "measured," said Kamlesh Bhatia, research director at Gartner, as the Indian market for mobile voice services has reached a plateau while the market for data services has proven to be very price sensitive. Some operators have large debts which makes it unlikely that they will invest a lot on spectrum at this point, he added.
The government is auctioning spectrum in the 1800MHz band in the 22 mobile phone service areas in the country and in the 900MHz band for use in the three large Indian cities of Mumbai, Delhi and Kolkata.
Key mobile operators, including Bharti Airtel, Reliance Communications and Vodafone's joint venture in India, are listed among the eight bidders in the auction.
The government hopes to raise at least US$1.8 billion from the auction.
A win is crucial for incumbents such as Vodafone and Airtel, whose entitlement to the use of bandwidth comes to an end soon in the three cities covered by the 900MHz auction. These companies have to bid because they need the spectrum to continue some of their operations, Bhatia said. The companies lost a bid Sunday in the country's Supreme Court to delay the auction.
In February 2012, the Supreme Court ruled that 122 mobile licenses awarded in 2008 across 22 service areas had to be canceled as there were irregularities in their allotment. The spectrum released was to be auctioned, the court ordered. In previous auctions, the main bidders were companies like the Indian ventures of Telenor who lost their licenses as a result of the Supreme Court order.
In August the government amended its rules to allow wholly owned subsidiaries of foreign companies to operate telecom services and bid in the auction.