A fierce auction for the 3G mobile phone spectrum in India ended on Wednesday, generating US$14.6 billion for the government, the Department of Telecommunications said.
The government had expected to get less than 350 billion rupees (US$7.5 billion), but over 34 days of bidding the amount rose to 509.7 billion rupees, according to bid prices listed on the Department of Telecommunications’ Web site.
Two state owned companies, which were given advance spectrum, must also match the winning bid prices, making the total amount made by the government 677 billion rupees.
The government could use that unexpected windfall to trim its swollen fiscal deficit.
“Of course, getting extra money from the 3G auction will provide a little more elbow room and fiscal space for me to manage financial matters,” Indian Finance Minister Pranab Mukherjee told reporters.
Whether India’s winning telecoms companies will make out as well remains to be seen, analysts say.
None of the seven winning operators will have a nationwide presence. Bharti Airtel, Reliance Communications and Aircel each won bids in 13 of 22 areas, more than any other company. Vodafone bought into nine areas.
Market leaders Bharti, Vodafone and Reliance Communications paid dearly for spectrum in the key markets of Mumbai and New Delhi, but will need to tie up with smaller players to provide nationwide coverage for their 3G customers.
The three winning bidders for the New Delhi spectrum each paid 33.2 billion rupees, while Mumbai’s three winners paid 32.5 billion rupees.
The auction hit in the middle of a brutal mobile phone price war in India and paying for spectrum will hit already eroding margins.
Sandeep Ladda, an executive director at PricewaterhouseCoopers in Mumbai, said what many operators really wanted was not the 3G license, but the additional spectrum to serve India’s fast-growing customer base.
He said it could take five years before the operators recoup their bids.
A separate auction for the broadband wireless spectrum is expected to start soon.
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