Perhaps not since 2000, when many Western European mobile operators seriously overpaid for 3G spectrum, and when several major firms nearly went bankrupt, has any group of mobile operators faced such peril as India’s companies, in preparing for upcoming auctions for 700-MHz spectrum.
The developing problem, as was the case earlier, is that spectrum prices might be so high the winning firms risk being unable to earn a return on the assets.
The minimum posted prices could mean payments of 5.4 trillion rupees ($79 billion). “The total amount is both staggering and ridiculous,” said Chris Lane, an analyst at Sanford C. Bernstein in Hong Kong, “Operators are already struggling under the weight of the previous two auctions.”
Proceeds of $79 billion would be four times the record amount the nation raised in the last auction, and compare with about $100 billion paid by mobile operators in Europe in 2000, who serve customers with average revenue per user an order of magnitude higher than in India.