A tale of many auctions: mobile communications in India struggle to overcome a dysfunctional structure
| Pages | 225-250 |
| Published date | 08 May 2017 |
| DOI | https://doi.org/10.1108/DPRG-11-2016-0048 |
| Date | 08 May 2017 |
| Author | Peter Curwen,Jason Whalley |
A tale of many auctions: mobile
communications in India struggle to
overcome a dysfunctional structure
Peter Curwen and Jason Whalley
Peter Curwen is Visiting
Professor of Mobile
Communications and
Jason Whalley is
Professor of Digital
Economy, both at the
Newcastle Business
School, Northumbria
University, Newcastle, UK.
Abstract
Purpose –The purpose of the paper is to assess whether the dysfunctional structure of the Indian
mobile communications sector has been improved by a large number of spectrum auctions during the
period 2010-2016.
Design/methodology/approach –This paper provides a case study of developments in the Indian
mobile communications sector primarily during the period 2010-2016. This period has witnessed a large
number of spectrum auctions, the results of which are presented and analysed. The particular focus is
upon the consequences of these auctions for the structure of the sector which began the period in what
can best be described as a dysfunctional state.
Findings –The paper concludes that only limited progress has so far been made in improving the
structure of the sector. This is due to factors such as political interference, delays in completing merger
& acquisition (M&A) activity, badly organised auctions, a scarcity of the right amount of spectrum in the
right places and a regional structure that inhibits operators from providing a nationwide presence.
Practical implications –The paper concludes that considerable progress still needs to be made: For
example, political interference needs to be harmonised, auction prices need to become market-clearing
and M&A activity needs to come to fruition.
Originality/value –The existing analysis of the sector has paid only limited attention to the significance
of auctions for the structure of the sector, and this paper provides an analysis of all auctions and M&A
activity virtually to the end of 2016, making it unusually up-to-date.
Keywords India, Auctions, Communications, Mobile, Mergers & acquisitions, Spectrum
Paper type Case study
Introduction
The situation in India, where mobile spectrum allocation is concerned, can reasonably be
described as dysfunctional. A full explanation of why this is the case is too complicated to
detail here, although an excellent review of the historical context and the role played by
corruption can be found in Sutherland (2016),Prasad and Kathuria (2014) and Curwen
(2009,2010,2012a,2012b). Suffice it to say that although India has recently managed to
issue 2G, 3G and 4G licences within the context of a complex regionally based licensing
system, it remains the case that – subject in part to the resolution of ongoing disputes – it
is still not clear which operators will be providing which technologies in which parts of India.
The structure of the Indian mobile market is extremely unusual. The largest mobile market
in the world, China, has only four nationwide networks (all state-controlled) by virtue of
government edict as does the exclusively private US market – at least in terms of
nationwide coverage, although there are a significant number of generally small regional/
local networks – by virtue of market forces combined with strong regulatory bodies.
However, the Indian market is divided into what is effectively a large number (currently 22)
DOI 10.1108/DPRG-11-2016-0048 VOL. 19 NO. 3 2017, pp. 225-250, © Emerald Publishing Limited, ISSN 2398-5038 DIGITAL POLICY, REGULATION AND GOVERNANCE PAGE 225
of major cities and regions known as “circles” and, historically, operators did not provide a
nationwide service. As a result, between 10 and 15 private networks co-existed with the two
controlled by the state which between them (unequally) shared nationwide coverage. Some
of these networks used Global System for Mobile (GSM) technology, whereas others used
a technology known as Code Division Multiple Access (CDMA) and subsequently as
cdma2000 (Curwen, 2002).
The main mobile network operators discussed in the text are as follows. They are listed in
decreasing order of magnitude as a percentage of total subscriber numbers at end-June
2016. At that time, subscribers comfortably exceeded one billion, of which more than 900
million were deemed to be “active”. The main shareholders are also listed – see Wikipedia
(2016a) for updated figures:
Bharti Airtel: (Bharti Enterprises; SingTel) – 24.7 per cent;
Vodafone: (Vodafone) – 19.3 per cent;
Idea Cellular: (Aditya Birla Group; Axiata; Providence Equity) – 17.0 per cent;
RCom: (Reliance ADAG) – 9.5 per cent;
BSNL: (State of India) – 8.7 per cent;
Aircel: (Maxis Communications; Sindya S&I) – 8.6 per cent;
Tata DoCoMo: (Tata Teleservices; NTT DoCoMo) – 5.7 per cent;
Telenor: (Telenor) – 5.1 per cent;
MTS: Sistema: Shyam Group: (State of Russia) – 0.7 per cent;
MTNL: (State of India) – 0.4 per cent;
Quadrant Televentures: (Videocon Group) – 0.3 per cent; and
Reliance Jio: (Reliance Industries) – was in process of launching.
As can be seen, three of the networks account for roughly 60 per cent of all subscribers and
the state-controlled networks are relatively small. MTS is the brand name of Sistema Shyam
TeleServices, which is also identified as SSTL. It agreed to be bought by RCom in
November 2015. Other networks have amended their names over time as a result of
changes in ownership – for example Vodafone Essar to Vodafone. A number of other
networks appear early on in the narrative but no longer remain in business as a result either
of licence revocation (e.g. S Tel) or takeover/merger (M&A) activity (e.g. Loop Telecom).
Videocon, which shared its ultimate owner with Quadrant Televentures, is also no longer in
operation, having been shut down in February 2017.
Auctions 1 (2.1 GHz band) and 2 (2.3 GHz band) in 2010
India was still in the throes of discussing how to allocate 3G spectrum – suitable for data
transfers at relatively low speeds by modern standards – at a time when Europe and the
USA had moved on to consider the issue of 4G licences – almost always for the use of
Long-Term Evolution (LTE) technology (Wikipedia, 2016b). Eventually, the government
decided in 2010 to hold back-to-back auctions for 3G and Broadband Wireless Access
(BWA) licences (Government of India, 2010;ETSI, 2016).
The 3G spectrum, comprising 5 MHz paired blocks in the 2.1 GHz band, was offered
independently in all 22 “circles” in April 2010. There were nine qualified bidders: Aircel,
Bharti Airtel, Etisalat, Idea Cellular, Reliance (RCom), S Tel, Tata Teleservices, Vodafone
Essar and Videocon Telecoms – Uninor (subsequently Telenor) and Loop Telecom were
not interested. The auction ended after 34 days and 183 rounds and INR677bn ($14.63bn)
was raised, including the matching prices paid by state-controlled incumbents BSNL and
MTNL. No bids were made for a licence encompassing every circle, which came as no
PAGE 226 DIGITAL POLICY, REGULATION AND GOVERNANCE VOL. 19 NO. 3 2017
To continue reading
Request your trial