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3G Auction India: The Uttar Pradesh Problem; Points To Ponder

3G Auction Results coverage brought to you by One97 Communications. Lets Get Talking about 3G!

No telecom operator has received pan-India spectrum, at the end of India’s 3G Auction. Above all, I think it’s ridiculous from a consumer perspective that Uttar Pradesh was split into two circles. Aircel and Vodafone have spectrum only in UP (East), while Bharti Airtel and Tata Teleservices have spectrum in UP (West). Idea Cellular is the only one to have spectrum in both the UP circles. Download our 3G auction chart here (pdf).

How do you operate in half a state? What do you tell a consumer in UP: that if he crosses the invisible spectrum border between UP (East) and UP (West), 3G services will stop working? Consumers expect coverage to be ubiquitous. Our take is that, in the interest of consumer experience, spectrum sharing within a state should be allowed.

Perhaps telecom operators will take the approach taken by BSNL: launch city-by-city, instead of state by state. That means that the addressable market for 3G shrinks further, and the price paid for 3G spectrum looks even less realistic.

Also note how randomly the spectrum slots have been distributed: in many cases, telecom operators who have been fortunate enough to get adjoining states, do not have the same spectrum slot in both. So consumers will have to be transitioned from one frequency band to the other when they cross state boundaries, which means that if you’re watching a live video stream while travelling from Mumbai to Pune (Maharashtra Circle) on Vodafone, you will be disconnected before a switchover.

The broadband wireless auctions should begin in a couple of days, with more bidders, but hopefully, more insight following these 3G auctions.

Meanwhile, some external news coverage for you to look at (we’ll update this on the fly):

— Idea Cellular will pay Rs. 9.62 crores for every Rs. 100 crores of revenue currently being generated in the circles it has won. More on other operators at the Economic Times

— The metro circles (Delhi & Mumbai) are priced on part with UK and Germany, at $5.5/MHz/population, and $0.6/MHz/population on an all India basis, on par with US 3G benchmarks. More at Hindu Business Line

— Telecom operators may have to sell assets within the next 10 days to pay for 3G. Airtel will see its debt-equity ratio will rise to 2.3, while RCOM and Idea Cellular will rise to 3.5. More at Mint

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