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Strategy behind the 3G bidding

Published on Wed, May 19, 2010 at 18:41 | Source : CNBC-TV18

Updated at Thu, May 20, 2010 at 12:12

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The auction for third-generation (3G) mobile spectrum licences in India has finally ended, generating an approximate roughly of Rs 1100 crore in revenue for the government. Vodafone, Bharti Airtel and Idea Cellular were among winners for key circles at this auction. Reliance and Aircel too were among major winners.

Postive distribution

Analyst, Jaideep Ghosh of KPMG said he was pleased with the distribution and thinks it prudent that company's bid specifically for circles keeping in mind their margins and their user base. It would have been difficult for a single player to bid for all 22 circles.

Below are Ghosh's takes on some bidders. For more watch the video

Why Bharti leave Mahrastra and Gujrat

I think it's a question of limited amount of funds that each of these bidders would have and they need to maximize based on their own business, on the basis of valuation and on how they see the numbers in that particular circle leveraging their current presence there as well as future potential. Bharti definitely would have progressed to perhaps N minus 1 kind of the last round minus one kind of situation. Bharti has to also, fund the Zain acquisitions as well as other investments are planned. To roll out 3G itself would be a reasonably expensive affair so in that context it's a conscious business decision of the management not to proceed and leave it at that.

Logic behind Vodafone's bid

Vodafone's strategy seems to be that they will get the top Delhi, Mumbai, Maharashtra, Gujarat, Tamil Nadu and then of course Calcutta apart from a couple of others like UP and so on and so forth. So I think Vodafone strategy clearly seems to be focusing the entire kitty that they have in the top circles so as to actually make a meaningful business out of the 3G, potentially 3G friendly or more potential circles from uptick perspective.

What was the Idea?

So far as Idea is concerned, it is focused on circles like Kerala in which they are number one or very strong. Similarly, they've bid in Punjab, Haryana, UP East, UP west where they are fairly strong. So I think they have chosen beyond a point of time to kind of drop out of Mumbai, Delhi and some of the other circles. At the same time, if you look at Maharashtra, Idea is fairly strong in its 2G operations, in that context they have again picked up Maharashtra circle at a fairly higher price of Rs 1257 crore which again makes sense. I think some of it is based on conscious business decision, some of it is based on auction tactics and strategies which others are kind of playing also.