Shares in Indian mobile network operators rallied on Tuesday with Bharti Airtel rising as much as 9.3 per cent to the highest level since February 1, on hopes the government will be forced to cut the reserve price for airwaves after just one potential bidder emerged for a US$7.9 billion spectrum sale next month.
The Indian mobile unit of Russian conglomerate Sistema was the only bidder for the CDMA band airwaves and there was no applicant for the dominant GSM bands that account for close to 85 per cent of the spectrum being put on the block.
Leading carriers Bharti Airtel and the Indian unit of Vodafone, which are required to bid for airwaves in the premium 900 megahertz band to renew their permits in some key zones, stayed away from bidding after challenging the auction in a court.
"Earlier the expectation was these operators will be compelled to bid," said a Mumbai-based telecommunications analyst at a foreign bank. "Now that they did not bid, it is almost certain that the prices will have to come down," said the analyst, who did not want to be named as he is not authorised to speak to the media.
Carriers mostly shunned another auction in November, saying the minimum bid price for the airwaves was too high, forcing the government to cut prices by about 30 per cent in some key zones. That cut was not sufficient, the industry says.
Bharti Airtel would have had to pay about $1.4bn at the current reserve price to buy back the premium band airwaves in the Delhi and Kolkata service areas, according to an estimate by BNP Paribas.
Idea is not required to bid in the March auction, but any possible cut in reserve price will also help it when it buys airwaves in subsequent auctions.
"There are chances that the government will reduce prices significantly," said Archana Shivane, a sector analyst at KR Choksey Shares and Securities in Mumbai. "That will consequently make Bharti, Vodafone, Idea pay lower spectrum prices to government. So ultimately that will come on (their) balance sheet in terms of lower debt," she said.