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3G auction earns India 14.6 billion dollars

Text by News Wires

Latest update : 2010-05-19

Ending an epic auction, Vodafone and Bharti paid a combined $5.1 billion for 3G mobile licenses in India. Reliance Communications also won the right to provide third-generation services in a deal that will generate $14.6 billion for the government.

REUTERS - Vodafone and Bharti paid a combined $5.1 billion for 3G mobile licences in India, ending an epic auction that yields a bonanza for a deficit-strapped government but puts winners under pressure.

Reliance Communications also won the right to provide third-generation services in an auction that lasted 34 days and will generate $14.6 billion for the government, authorities said on Wednesday, nearly twice what it had expected.

“It’s good news for the government, no doubt,” said Arun Kejriwal, strategist at Kris Research in Mumbai.

“For the operators it’s a large sum of money that has to be paid out. We have to see how these services are priced and received by the subscribers and how it will impact their profitability,” he said.

India is the world’s fastest growing mobile phone market with some 500 million subscribers. India’s three biggest carriers—Vodafone, Bharti Airtel and Reliance Communications -- each won the key licences for Delhi and Mumbai.

Nine private operators participated in the auction for three sets of licences, which ended with no single carrier winning high-speed third-generation spectrum in all 22 circles up for bid. Seven different carriers, including Idea Cellular and unlisted Tata Teleservices, ended up winning spectrum. Japan’s NTT DoCoMo owns 26 percent of Tata Teleservices.

A fourth licence will be sold separately and has been reserved for state operators.

India is a late adapter of 3G and is the biggest economy not to offer such premium services on a wide scale, although the state-run telecoms firms have 3G services in some zones.

Vodafone Essar, the UK giant’s India unit, will pay about $2.5 billion for its India 3G mobile spectrum, according to data on a government website. Bharti, the country’s biggest carrier in which SingTel has a stake, is paying about $2.6 billion.

The auction will help the government plug a fiscal deficit that last year reached a 16-year high, and may enable it to cut back on borrowing, bringing relief to satiated bond investors.

“The 3G auction results demonstrate that the government borrowing will sail through smoothly,” said Paresh Nayar, head of foreign exchange and money markets at First Rand Bank in Mumbai.

Date created : 2010-05-19