Hopes of telecom consolidation in India may be short-lived: Analysts

With the probability of Norwegian firm Telenor and Russian conglomerate Sistema-controlled SSTL bidding in the second round of spectrum auction in India, chances of consolidation in the country's telecom sector in the near term seem weak, says Malaysian banking firm CIMB.

"The Government of India announced spectrum auction guidelines which are expected to begin in March 2013.

There is high probability that Telenor (in Mumbai) and MTS will bid to retain their existing operations.

Hence, expectations of consolidation may be short-lived," said a CIMB report by its analysts Piyush Choudhary and Sanjesh Jain.

In order to attract more bidders, the government has reduced base price of CDMA spectrum by 50 percent and of GSM spectrum by 30 percent for second round of spectrum auction expected to start from March 11.

For Sistema Shyam Teleservices - whose 21 out 22 CDMA licences were cancelled last year by the Supreme Court in the 2G spectrum allocation case - it is mandatory to participate in the auction for continuing business, although final word on it is awaited.

In all, 122 telecom licences were cancelled by the apex court and auctions were held for the radiowaves to be vacated.

However, in the earlier round in November, there were no bidders for the 800MHz radiowaves, and only a few for the 900/1800MHz bands used by GSM operators on account of high base rates.

Telenor, meanwhile, has expressed displeasure over the quantum of price cut, saying it will decide on participation after seeing the main document, Notice Inviting Application, for the auction.

"We have stated earlier that the new base prices will have to be significantly lower than earlier for us to consider participating in the auctions.

"We are concerned to see that the revised prices remain high.

We are now awaiting the NIA which we will study carefully before arriving at our position towards the auctions," Telenor said in response to PTI query.

The report, meanwhile, also said the government's plan to simultaneously auction spectrum in various bands will give flexibility to operators to choose on quantum of spectrum they wish to acquire.

The government has announced the auction of 1800Mhz and 900Mhz band simultaneously, and separate auction of 800Mhz band in 21 of the 22 service area.

The spectrum being put for auction in 900Mhz includes spectrum from 8Mhz held by Bharti Airtel and Vodafone each in Delhi circle, 8Mhz each of Loop Mobile and Vodafone in Mumbai, and in Kolkata it is 6.2Mhz spectrum of Bharti Airtel and 7.8Mhz of Vodafone that is due for renewal in 2014.

In 1800Mhz, the government will auction 12 blocks of 1.25Mhz each in Delhi and Mumbai.