Bharti Airtel Ltd.

, India’s largest carrier, scrapped its plans to bid for natio

nwide licenses to offer third-generation, mobile-phone services because of high
prices and changing government policy.
India’s 34-day auction of 3G airwaves ended yesterday with none of the nine appr
oved bidders gaining a national coverage. The auction raised 677.2 billion ($14.
6 billion) for the government.
“The auction format and severe spectrum shortage along with ensuing policy uncer
tainty drove the prices beyond reasonable levels,” Bharti, which is paying 123 b
illion rupees for permits in 13 of the country’s 22 telecommunications regions,
said in a statement yesterday. “As a result, we could not achieve our objective
of pan-India 3G footprint.”
The license prices stoked concern that carriers won’t be able to recoup their in
vestment from a market where calls cost a penny a minute, the cheapest in the wo
rld. France Telecom SA and Deutsche Telekom AG posted record losses after Europe
an phone companies paid more than $100 billion to buy 3G licenses a decade ago.
“We expected players not to bid pan-India because prices were soaring,” said Nav
een Kulkarni, an analyst with MF Global Sify Securities India Pvt. in Mumbai. “O
perators only bid in circles where they have substantial strength -- large subsc
riber bases or revenue share. It’s slightly surprising that Bharti didn’t bid fo
r Maharashtra and Gujarat” states.
‘Strategic Footprint’
Vodafone Essar Ltd., the Indian unit of the world’s biggest mobile-phone operato
r by sales, never planned on an all-India presence, said Nick Read, chief execut
ive officer of Vodafone Group Plc’s Asia-Pacific and Middle East operations.
“Right from the outset, we said to ourselves we were not going for a pan-India l
icense: What we wanted was a strategic footprint,” he said in a phone interview.
“It’s been a very long process, a very competitive process and obviously it was
a pretty scarce resource, that made the auction last so long.”
Vodafone Essar won nine regions for 116.2 billion rupees.
On May 11, India’s telecommunications regulator said prices for 3G spectrum esta
blished through the auction should be used as a base to charge for second-genera
tion airwaves. The recommendation threatens to raise costs for mobile-phone comp
anies.
The lack of clarity on regulations “gets worse by the day,” Mark James, an analy
st with Liberum Capital Ltd., said by phone from London before the auction ended
.
Based on the final bids, licenses for nationwide 3G coverage would have cost Bha
rti $3.6 billion.
The Internet-based auction was designed by NM Rothschild & Sons Ltd. and economi
sts at London-based DotEcon Ltd.
Reliance Communications Ltd., India’s second-largest wireless operator, bought a
s many zones as Bharti, including the two most expensive regions of Delhi and Mu
mbai.
Reliance won areas with “immediate potential,” it said in a statement yesterday.
Aircel Ltd., controlled by Malaysia’s Maxis Communications Bhd., bought 13 regio
ns, and Idea Cellular Ltd. 11 zones.