India auction licenses for the 2G telecom spectrum

Indian mobile consumers could be spared a large tariff hike due to the mandated auction of 2G telecom spectrum. Industry analysts don’t foresee a tariff war in the run-up to the auction and say there could be a minor pricing correction thereafter without significantly burning a hole in the consumers’ pocket.

The auction, made necessary after the Supreme Court order annulled 122 telecom licenses, is rather likely to trigger a consolidation in the 15-player sector, resulting in little pricing freedom to the biggies.

Indian players such as Videocon and Unitech, who have lost their licenses may find bidding a challenge and there would be a consolidation in the sector according to  Mahesh Uppal, director of consultancy firm ComFirst India.

Heated tariff wars are unlikely in the coming months and there might be a slight correction in the price but this would not affect consumers at large. However, owing to consolidation, the huge pressure on the margins of these players would definitely get reduced, he said.

Analysts said the auction is also not going to witness aggressive bidding either. For, the financials of the older players who coughed up huge amount of money for 3G bidding are not that strong. The 3G service has not really taken off so far.

The Supreme Court, while ordering the revocation of 122 telecom licenses, has given four months’ time to the affected operators to shut shops.

Oslo-based Telenor which has majority stake in Uninor has been the worst affected as all its 22 licenses are cancelled following the apex court verdict.