India’s 2G auction off to inauspicious start

India’s much-publicized auction of 2G spectrum got off to an inauspicious start earlier this week, with bidders showing little interest in some of the frequencies up for sale.

A unnamed government official quoted by Reuters said there were no bidders in some ‘circles’, or regions of the country, while other media reports claimed that spectrum in the relatively affluent Delhi and Mumbai circles had attracted no offers during the first two rounds of bidding.

India’s much-publicized auction of 2G spectrum got off to an inauspicious start earlier this week, with bidders showing little interest in some of the frequencies up for sale.

A unnamed government official quoted by Reuters said there were no bidders in some ‘circles’, or regions of the country, while other media reports claimed that spectrum in the relatively affluent Delhi and Mumbai circles had attracted no offers during the first two rounds of bidding.

Bharti Airtel (New Delhi, India), Vodafone (Newbury, UK), Idea Cellular (Mumbai, India), Videocon (Gurgaon, India) and Telenor (Oslo, Norway) have applied to participate in the auction of second-hand airwaves.

The frequencies were originally sold during an auction of 2008, but India’s Supreme Court cancelled the licenses earlier this year, citing corruption in their allocation.

According to authorities, spectrum was given away for just a fraction of its real value.

Both Idea Cellular and Telenor were stripped of licenses as a result of the Supreme Court’s decision. Idea Cellular hopes to reclaim seven licenses without which it cannot provide services across the entire country, while Telenor will not be allowed to continue operating in India unless it wins back something.

Nevertheless, several operators that were penalized, including Russia’s Sistema, have decided to write off their Indian investments and avoid the new auction entirely.

What’s more, spectrum based on the CDMA standard, which India’s regulator had looked to sell at the end of the auction process, has attracted no interest since Tata Teleservices and Videocon announced they would not bid for the airwaves last week.

India’s government has set a starting price for the spectrum of 140 billion rupees ($2.6 billion) for 5MHz of frequencies in all 22 circles, but that is more than seven times the amount that operators paid in 2008.

In the meantime, India’s mobile-phone market has lost much of its shine. With little room for growth in wealthier communities, operators are competing for business in the poorest parts of the country and prices have fallen dramatically.

Operators paid more than $12 billion in 2010 for licences to provide 3G services, but those have met with a lukewarm response.

Last week, Bharti Airtel published third-quarter earnings that proved how tough conditions have become, with profits down 30% on last year’s figures.