India’s post-auction trauma

Author: Michael Newlands
Published: 2015-03-29

The Indian multi-band spectrum auction is over, results are published and the government is eagerly looking forward to a massive windfall to plug the budget deficit.  The government is happy and everyone else is trying to put a good face.

But we are in one of those “only in India” situations.  India’s Supreme Court still has to make rulings on a number of law suits brought against the government by various operators in lower courts around the country seeking to have the auction delayed and the rules changed.  The Court ordered all of the cases be transferred to it and then gave the government permission to go ahead with the auction, but not to publish the results until it said so.

It is scheduled to start hearing the cases on April 16, and depending on what the Court determines, the results of the auction could be declared null, or specific licenses in particular “circles” (regions) could be re-awarded, or of course nothing might change.  The government certainly hopes so and has been proclaiming from the rooftops what a success the auction was.

Once the auction ended the Court then listened to an urgent petition from the government asking for it to be allowed not just to publish the results, but to collect initial instalments of between 25% and 33% of the total paid for spectrum by operators (an estimated $4.6 bn).  The hurry, the government explained, was because the financial year ends on March 31, and it needs the money to make ends meet.

The auction rules give the operators 10 days to fork up, which means cut off is April 4.  The Court told the government it was up to them to persuade the operators to pay, and the government is now trying to do that. The question is, why on earth should they (if they do, the answer might be blackmail from the government side):

–      They hate the way the auction was structured to bring maximum revenue to the government and cause maximum inconvenience and cost to them.The big three (Airtel, Vodafone India, and Idea Cellular) did not want their expiring 900 MHz licenses to be auctioned at all, but rather to be re-awarded to the incumbents at a fair market price.

–      They believe prices were artificially inflated by Reliance Jio, which had no interest in the 900 MHz band, bidding for it anyway to drive the price up.  This dented their warchests making it difficult for them to bid on 2.1 GHz, 1800 MHz, and 850 MHz.   Jio’s priority was clearly to combine 850 MHz with its pan-Indian 2.3GHz TDD spectrum for its soon-to-be-launched data-centric Jio 4G network.

The government fetched a total of $17.6 bn in the auction.  Reliance Jio paid just over $1.5 bn.  This is in strong contrast to the $4.4 bn Idea Cellular paid for just 900 MHz, the $3.6 bn paid by Airtel to win back its 900 MHz licenses, and the $3.4 bn paid by Vodafone for 900 MHz.

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