| NEW DELHI
NEW DELHI Jan 16 Reliance Industries'
surprise entry into an Indian auction for mobile phone spectrum
has raised the prospect of fierce bidding, intensifying
competition in a crowded cellular market that has seen margins
improve after a lengthy price war.
Reliance, controlled by India's richest man Mukesh Ambani,
sits on a cash pile of nearly $15 billion, which gives it an
advantage at the spectrum auction over rivals like market leader
Bharti Airtel Ltd, which had nearly $10 billion in
debt as of end-September.
Reliance also already owns a nationwide licence for
high-speed 4G mobile phone networks, which it won by outbidding
rivals three years ago. The service, by its Reliance Jio
Infocomm unit, has yet to be launched.
"The immediate impact is that of intense competition in
auctions," Credit Suisse analysts said in a note.
"The longer term impact could be increased competition and
higher capex for incumbents," the brokerage said, downgrading
shares in Bharti Airtel and third-ranked Idea Cellular
Shares in Bharti Airtel and Idea tumbled on Thursday,
largely due to Reliance's application to bid. Bharti stock
closed 4.8 percent lower, its biggest drop since September last
year, while Idea Cellular tumbled 7.2 percent, losing
the most since May 2010.
Reliance on Wednesday joined seven carriers including
Bharti, Vodafone and Idea to bid for spectrum in the
auction. India hopes to raise at least $1.8 billion during the
fiscal year to March from the auction which is scheduled to
start on Feb. 3.
Reliance gets most of its revenue from oil and gas. The
spectrum bands it applied to bid for would enable the company to
provide basic cellphone services, which account for more than 80
percent of industry revenue in India, a country where call rates
are among the cheapest in the world.
Most Indian telecom operators saw razor-thin margins improve
slightly last year after they were able to raise call prices,
helped by a court order that revoked permits of some smaller
carriers, which were forced to scale back or shut down.
Two bands of frequencies -- 900 megahertz and 1800 megahertz
-- will be sold. Bharti and Vodafone want spectrum in the 900
MHz band to renew permits in key cities like Delhi and Mumbai
but they could also use the spectrum for 3G services.
Reliance Industries could use the 1,800 MHz band to offer
cellphone services or a different kind of 4G network. With the
900 MHz spectrum, it could provide 2G as well as 3G mobile
Reliance aims to buy spectrum in both bands as 900 MHz is
not available beyond Delhi, Mumbai and Kolkata, said a person
familiar with the company's plans who declined to be named as he
is not authorised to talk to the media.
Reliance already has deals to share infrastructure with both
Bharti and Reliance Communications, which is
controlled by Mukesh Ambani's brother, Anil Ambani.
($1 = 61.5550 Indian rupees)
(Editing by Tony Munroe and Miral Fahmy)