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Summary:

Indian auctioned the 2.3 GHz spectrum for deployment of Broadband Wireless Access services for roughly $5.5 billion. The big winner was Infotel, a private company that has now agreed to be bought by conglomerate Reliance Industries. The 4G-focused spectrum is expected to compete with 3G service.

Indian authorities just wrapped up an auction for the 2.3 GHz spectrum to be used for broadband wireless access (BWA) services; it raised a total of $5.5 billion, roughly half of the $11 billion raised during the 3G auctions. The biggest winner of the auction was Infotel, a privately held company that won licenses for all 22 regions, thus allowing it to become the largest wireless broadband provider in the country.

Interestingly, none of the 3G spectrum owners have a nationwide footprint, which gives Infotel a big leg up in wireless broadband services. This discrepancy alone should raise eyebrows, but so far I’ve not seen it brought up in the Indian media.

What’s more intriguing is that right after the auction closed, Mukesh Ambani’s Reliance Industries agreed to buy Infotel for $1 billion and said that it would pay the $2.74 billion Infotel would have had to fork over for the spectrum licenses. Mukesh’s estranged brother, Anil Ambani, who owns Reliance Communications didn’t win in the BWS auctions, though his company won many 3G licenses.

Their family rivalry makes me believe that there were some behinds-the-scene machinations that led to this deal. Was Infotel doing Mukesh Ambani’s bidding during the auction, thus lulling Anil’s camp into complacency?

Nevertheless, in an effort to increase his presence in telecom, Mukesh, the world’s fourth-richest man, is likely to start a wireless broadband pricing war, which could have a detrimental impact on other carriers that have spent billions buying 3G spectrum licenses.

Other big winners of the BWA auctions were Aircel (eight licenses, $747 million), Tikona Digital Networks (five, $227 million), Bharti Airtel (four, $720 million) and Qualcomm (four, $1.045 billion.) Qualcomm got licenses for the top circles in India: Delhi, Bombay, Haryana and Kerala. Its interest in buying the spectrum is to disrupt the rollout of WiMAX services in India and instead push the LTE agenda.

Reliance Communications, Vodafone Essar, Idea Cellular and Tata Communications failed to win any spectrum.

For the full report, visit the official DoT site.

  1. Om,
    I am not sure why WiMax is preferred by folks instead of LTE. I think the reason could be that the equipment is cheaper and mature compared to LTE. Wimax if deployed quicker can satisfy the broadband needs of many consumers. Your take an the Ambani brothers is interesting. I believe you might have unearthed something there. These two brothers need to talk with each other and get over the fight.

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  2. Om: MediaNama had highlighted the fact that Infotel is the only entity to have pan-India spectrum in the auctions (whether 3G or BWA) – http://bit.ly/abm25Z

    About the Ambani brothers, there’s some history to take into account there. Mukesh Ambani couldn’t enter the telecom arena because of a non-compete agreement with Anil Ambani. The non-compete agreements were re-negotiated a last month (http://bit.ly/9QeR0j) to exclude most sectors, including Telecom, so the entry on Reliance Industries into Telecom was anticipated. I doubt there would have been complacency from Anil Ambani’s side – it’s long been rumored that another bidder – Tikona Digital – was backed by Mukesh Ambani. Anil Ambani’s Reliance Communications (RCOM) is rather strapped for cash right now, having already paid around $1.83 Bn for 3G spectrum. They’re looking to raise money by selling up to 26% stake.

    An interesting development since the announcement of the results is that RCOM has made overtures to the BWA Auction winners (especially RIL) about using RCOM infrastructure, probably for backhaul. Appears to be a thaw in that relationship, given that they’ll have to work together in the natural gas sector.

    On Qualcomm, they’ll have to sign up an Indian partner soon because there’s a 74% cap on foreign ownership in telecom operators in India. So 26% is up for grabs, and perhaps an operator like Tata Indicom, which didn’t win anything in this auction, will come on board.

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    1. Nikhil

      Thanks for the comment. I have been keeping up with the developments. I have been amazed at the speed with which the deal was announced. Which tells me

      1. Infotel knew the outcome.
      2. Mukesh’s group was all set with an offer and ready to go.

      The coincidence is pretty amazing.

      And even if there has been thawing of relations, I bet you Anil’s group would have been aggressive about bidding for this spectrum had they been aware of the deal. Just adding two and two together ;-)

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      1. yeah, I agree: the speed with which it was announced did surprise everyone, though I don’t think it would have affected ADA’s bid. ET had reported this deal before the auction ended, so it would have been in discussions. Like I said, Tikona was bidding as well. The people rumored to be behind Infotel (HFCL promoter Nahata) has a history of acquiring spectrum and then selling stake. Nahata owned Jumbo Techno Services had acquired 2G spectrum in 2008, and then sold most of the stake in the company (64% if I remember correctly) to Videocon.

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      2. Better Keep Anonymous Saturday, June 12, 2010

        Hi Om,
        Ask anyone who has worked with Mukesh. It was really hard on him to let RCom go to Anil. We had seen him and the team working till 3-4 AM almost everyday for years to built the company at an awesome speed and class.
        He always wanted to return to communications and this acquisition is no surprise. Two years back, if the market and oil prices wouldn’t have crashed, you might have heard a big news at time itself.
        If you look at some of the quick events that happened in last few weeks, this entry is not surprising.

        Moreover, this whole thing (acquisition) is just a front end. It is too obvious for people in communication business in India to understand Infotel (who?) to win pan India license for BWA at such a price and Reliance buying then within a few days of non competence agreement ending between two brothers.
        I always wished the war between two brothers to end ASAP. They can give Indian consumers so many things that they are deprived of today. (remember the price of making mobile call before Reliance entered the market?)

        Best wishes to Mukesh! and now to Anil as well! :)

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  3. Om, PTI and WSJ are both reporting that the auction generated 383 billion rupees ($8.2 billion) in spectrum fees.

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    1. Mo,

      Add up the numbers — it comes to about $5.56 billion. I am pretty sure about the math here.

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      1. The results announced by the Department of Telecom on their website are for private telecom operators only, amounting to Rs. 256.95 billion, approx $5.49 billion.

        One additional slot of spectrum per circle has been reserved for the BSNL-MTNL combine (government owned telecom operators), so that takes the total money raised from the auction to Rs. 385.43 billion – approx $8.24 billion.

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    2. $5.56 billion is the money collected from the auction from Bharti, Augere, Tikona, Qualcomm, Aircel and Infotel.

      BSNL+MTNL, the state operators, were given the spectrum outside the auction. They will be paying the amount for all 22 circles which will be $2.74 billion.

      That total money Indian government will get from the BWA auction is $8.2 billion(5.56+2.74) which is what WSJ is referring to.

      Read more here – http://bit.ly/9wwd1u

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  4. This just shows how bad for business government spectrum auctions are. It is corrupt on the face of it- can you imagine the government auctioning the right to sell computers or offer maid services for a region? The government cronies make billions, and the possibility of genuine competition is reduced, if not eliminated.

    More importantly, Billions of dollars that could go into making quality communications network infrastructure are diverted to, quite literally, pay off corrupt thugs who will use violence if you don’t follow their edicts.

    Mobsters everywhere only dream of being able to run scams like this.

    And we all suffer.

    So, please, don’t write about it as if it is legitimate, as if it is an aspect of the nature of business.

    It is destructive, and it is holding back the advancement of humans everywhere.

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  5. Who cares corrupted auctions that never benefit coommon Indian

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  6. 4G in India? Big joke. I live in India and still can’t find 2G signal in my village !

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    1. I don’t even receive strong signals in my city kolkata some places!!

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  7. Mukesh, the world’s fourth-richest man, is likely to start a wireless broadband pricing war, which could have a detrimental impact on other carriers that have spent billions buying 3G spectrum licenses.

    Th last time he did that was when reliance entered mobile telephony , which forced all carriers to bring down the cost of calls and thus made the cellphone a possibility for a huge number of Indians, thereby increasing the subscriber base for everyone.

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  8. See this metric which Reliance has given : Pan-Indian cost (in USD/Mhz/population) of BWA spectrum was 0.06 against 0.32 for 3G.

    http://economictimes.indiatimes.com/News/News-By-Industry/Telecom/RIL-pegs-investment-for-telecom-entry-at-5-billion/articleshow/6043555.cms?curpg=1

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  9. Kapil Dev Kumar Tuesday, June 15, 2010

    Qualcomm has succeeded in bringing lot of debate around LTE and has really raised the question – WHYMAX.
    But is it worthwhile for the Indian Operators to wait for LTE to mature and be affordable ?
    Is there a way to start with WiMax and then EVOLVE in the LONG TERM !!!

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