07/10/2016 2:27 PM IST | Updated 07/10/2016 2:32 PM IST

Vodafone Spends Most As India's Spectrum Auction Flops

The tepid bidding came as the nation’s 12 wireless companies work through more than $60 billion in debt

Babu Babu / Reuters
A retail shop owner speaks on his mobile phone outside his closed shop shutters painted with an advertisement for Vodafone at a market in the southern Indian city of Chennai December 30, 2013. REUTERS/Babu/File photo TPX IMAGES OF THE DAY

Vodafone Group Plc's Indian unit was the biggest spender at an auction of airwaves that ended Thursday with the government raising a fraction of the 5.6 trillion rupees ($84 billion) that it had sought.

The world's second-largest mobile phone market raised 657.9 billion rupees as several carriers shunned the sale to preserve cash amid intensifying competition in the industry. Vodafone, the nation's second-largest operator, bid 202.8 billion rupees to increase its mobile broadband coverage to 17 regions in India, the company said in a statement. Bharti Airtel Ltd, the largest service provider, said it bought 142.4 billion rupees of spectrum.

No bids were received for spectrum in the 700 megahertz band that had the highest minimum price.

"The lack of enthusiasm was majorly due to its unrealistic pricing, high debt and single-digit growth that the industry is currently reeling under," said COAI, an industry lobby group, in an e-mailed statement. "On many an occasion, COAI has raised the issue of the high reserve price on the band, and how this could affect investor interest during the auction."

The tepid bidding came as the nation's 12 wireless companies work through more than $60 billion in debt and as more customers replace voice calls with apps that use data plans, crimping revenue. Airwaves that weren't sold can be re-auctioned in future at a lower reserve price. For the government, the miss will tighten the squeeze on what is Asia's widest budget deficit.

Credit rating company ICRA Ltd. had forecast bids of as much as $9.7 billion, citing a 41 percent increase in Indian telecom industry debt since March 2014. Airwaves in the 2,300 megahertz band sold out as telecom operators spent to increase their fourth-generation mobile broadband services.

Third-ranked Idea Cellular Ltd. said it had added airwaves to enable it to offer mobile broadband in most of the country. Reliance Jio Infocomm Ltd., India's newest carrier, said it spent 137 billion rupees.

The government will get an upfront payment of 320 billion rupees, Communications Minister Manoj Sinha said in New Delhi. Unsold spectrum will be auctioned in future, he said.

Airtel, controlled by billionaire Sunil Mittal, slid 0.7 percent as of 11:46 a.m. in Mumbai, while billionaire Kumar Mangalam Birla's Idea was little changed changed. Mukesh Ambani's Reliance Industries Ltd. -- which began offering mobile services last month under the Jio brand -- rose 0.1 percent.

"With the spectrum auctions done, one risk to the industry is behind us," Morgan Stanley analysts led by Vinay Jaising said in a report Friday. "Rising competitive intensity is the key risk and drives our cautious view on operators."

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