Broadband auction throws up surprise winner

Reuters | Fri Jun 11, 2010 | 3:11pm IST

Privately-held Infotel Broadband Services, which is being courted by Reliance Industries, unexpectedly emerged as the only firm to win nationwide licences to offer broadband in a booming market. U.S. chipmaker Qualcomm and India’s biggest mobile operator Bharti Airtel also won wireless broadband spectrum in some zones. New Delhi-based Infotel won spectrum in all 22 zones and will pay 128.48 billion rupees ($2.75 billion). The broadband radio airwaves auction, along with the third-generation airwaves auction is one of the biggest such spectrum auctions globally in recent years.

On Friday, a source with direct knowledge of the matter said Reliance Industries, India’s largest-listed conglomerate, was in talks to buy Infotel as it looks to re-enter the telecoms sector. Infotel is owned by the son of Mahendra Nahata, managing director of Himachal Futuristic Communications Ltd (HFCL) and is unconnected with HFCL, Nahata told Reuters. Infotel could not be immediately reached for comment and Reliance Industries, controlled by Mukesh Ambani, the world’s fourth-richest man, declined comment. Vodafone’s India unit, Reliance Communications and Idea Cellular, three of the country’s biggest cellular operators, did not win broadband spectrum in any of the zones in an auction that, like last month’s 3G auction, saw bids that exceeded expectations.

India will earn 385.4 billion rupees from selling three all-India licences to six private sector operators who participated in the auction, including Aircel, plus two government carriers. Together, revenue from the two auctions will touch 1.06 trillion rupees ($22.7 billion), about three times New Dehli’s initial estimates — a welcome windfall for a deficit-strapped government, although it puts pressure on telecoms firms. To fund its 

fiscal deficit, projected at 5.5 percent of 2010/11 GDP, the government is due to borrow a record 4.57 trillion rupees ($97 billion) in the year. But it had assumed revenue of 350 billion rupees from the spectrum auctions while preparing estimates and some analysts have said the bonanza could cut the deficit to 4.5 percent, reducing market borrowings.


While 3G allows high-speed Internet access and data transfer on mobile phones, broadband spectrum would enable firms to provide high-speed wireless data links with better coverage than fixed-line broadband — key for Internet penetration in India’s rural hinterlands, which have poor last-mile fibre connectivity. Industrialist Mukesh Ambani was freed to enter the telecoms sector after ending a pact last month with his long-estranged brother Anil Ambani that prevented them from competing on each other’s turf. When the brothers split up the family empire in 2005, Anil Ambani gained control of Reliance Communications, and his brother is widely seen to covet a return to the industry. Debt-laden Reliance Comm, which recently said it may sell up to 26 percent of the firm, exited the wireless broadband spectrum auction a week ago as bid prices significantly exceeded its business case estimates.

Eleven firms bid for broadband spectrum.

Cellular market leader Bharti Airtel, which won spectrum in four of the country’s 22 zones, said scarcity of slots and the auction format, resulted in extremely high prices. Bharti will pay 33.14 billion rupees for the spectrum it won. Bharti, Vodafone and Reliance Comm had paid about $7 billion in total for 3G spectrum in an auction that ended last month. There is no restriction on the technology companies can use to provide services for wireless broadband, be it WiMax or its rival LTE (long-term evolution) technology. Qualcomm had said its interest in the auction was aimed at faster deployment of LTE in India, as it bets on "inter-operability" between 3G and wireless broadband.

($1=46.8 rupees)


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