In Business Model, Internet Access, Mobile, Spectrum

Investors and service providers are speculating about what bottom line and top line impact might result from the recent Indian spectrum auctions that generated record $17.4 billion in spectrum costs for mobile service providers.

Observers say India’s carriers may have to raise prices (either for voice, or data, or both).

“While the costs of the industry are massive,” the average revenue per user (per month), or ARPU, of Indian telecom service providers is $2.96, compared with the international average of $35 to $40, according to the Cellular Operators Association of India.

The cost of acquiring spectrum in the recent Indian mobile spectrum auction were high enough that Bharti Airtel, Idea Cellular and Reliance Communications may take a sharp hit to earnings in 2016 and 2017, driven by interest charges on borrowed money spent to acquire spectrum, analysts estimate.

And most observers say retail end user costs are certain to rise, as the capital investment has to be recovered.

Bharti Airtel’s net profit could drop eight percent, starting in April 2016, US brokerage Morgan Stanley estimated. that would be mild, compared to what could happen at Idea Cellular and Reliance Communications.

Idea Cellular could see earnings before interest and depreciation drop 27 percent, while Reliance sees a plunge of 26 percent.

None of that, should it materialize, would be helpful for mobile service providers or policymakers seeking rapid growth of Internet access across the subcontinent.

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