3G auction: Which companies may gain?

The government on Thursday (August 27) rolled out its roadmap to the 3G and WiMax auctions. The auctions will not only pave the way for next generation technology over voice communication but will also help an already-desperate-for-cash government rake in about Rs 25,000 crore and help ease the fiscal deficit situation.
“Five 3G slots will be auctioned. Among the five, one slot has already been auctioned to BSNL and MTNL so the remaining four would be auctioned. The base price for pan-India would be Rs 3,500 crore,” Telecom Minister Anthony Raja said, adding, “Since the number of slots is only four, the auction price will be more and I feel the department will easily fetch Rs 25,000 crore.” The minister also said the auction would be completed within 90 days. The 3G auction has been delayed for over a year now. The Department of Telecom was earlier looking at a base price of Rs 2,020 crore while the Finance Ministry wanted it doubled.
Who wins, who loses?
Reactions poured in immediately after the auction announcement with big GSM players like Bharti welcoming the auction. Bharti and Vodafone with an easy cash position would be looking forward to the auctions. However, the relatively smaller players like Idea, Reliance Communication and Aircel will need to dig deep into their pockets to pay up. Another player that stands to lose is MTNL, which will — as per the norm set by the government — need to match the highest bids in the Delhi and Mumbai circles where it operates. MTNL, already a loss-making government entity, does have enough cash reserve but if required to shell out Rs 800 crore — as expected — it may be negative for the stock.
The CDMA players are the worst-hit. Reacting to the 3G auctions, SC Khanna of the Association of Unified Telecom Service Providers of India (AUSPI), a CDMA operators’ body consisting of Reliance Communication, Tata Indicom and Sistema Shyam, said he was disappointed with the auction because of both the high reserve price and the limited number of slots.
“The high reserve price will impact the 3G service’s affordability. Also, the government is creating artificial scarcity by auctioning just four slots,” Khanna said, adding that the government should have auctioned all the slots, the number being seven or eight.