3G auction guidelines – Incumbents at advantage
The DoT released the guidelines for auction of 3G spectrum. The key highlights include:
1) Eligibility: Existing license holders and foreign players with 3G experience to be allowed to bid in upcoming auction. Non licensees will have to acquire UAS license prior to the launch of commercial operations, if successful in the auction, which would cost them Rs16.6bn more than the existing players.
2) No of blocks at auction in each circle – No of blocks of 2x5 MHz of 3G spectrum (2.1 GHz ) at auction are; West Bengal - 1, Gujarat & Delhi - 2, HP & UP (w) - 3, Nil in Rajasthan & North east and 4 in the remaining 15 circles.
3) Only one block per participant: Only one block of 3G spectrum (2x5 MHz) and 1 block of BWA spectrum (20 MHz) shall be allotted to any single bidder in a service area. A block of 3G and BWA spectrum each is reserved for MTNL /BSNL at the price to be determined in the auction.
4) No further spectrum release in next 12 months: No further allotment of spectrum (other than currently at auction) is expected within next 12 months. However, if any auction is held within 12 months, the reserve price would then be the auction winning price for that service area.
5) Application deadline 5th Jan-09, Mock auction to be held on 12th & 13th Jan-09 and final 3G auction to commence on 16th Jan-09. BWA auction to begin 2 days after he close of 3G auction.
6) Auction amount to be paid within 15 days: Successful bidders will have to pay the auction bid amount within 15 days, including 25% payment in 5 days from auction.
7) Spectrum to be auctioned via 2-stage simultaneous ascending e-auction method (widely adopted method, also used by US & UK), consisting of
(a) Clock stage – Multiple round bidding process which ends when no of bids left are =< no of blocks. Winning price in each round would be the lowest of the qualified bids. Provisional winning price at end of each round would strictly be higher than in previous round, subject to cap on price increments at 10% of previous bid or 25% of reserve price.
(b) Assignment stage – Among winning bidders for selection of specified frequency blocks.
Our observations and views on 3G guidelines:
n On spectrum usage charge, TRAI and DoT have agreed for 1-2% increase and have discarded 1% incremental charge on 3G spectrum. Also the 3G spectrum is being excluded in determining the slab for calculation of spectrum usage charge, subject to approval by DoT.
n The 8, Metro & Cat ‘A’ circles (high revenue generating circles contributing 60% of industry revenues) and circles with fewer blocks (Delhi, WB, Gujarat) for auction would likely see intense bidding, in our view.
n The guidelines remain silent on 3G spectrum for CDMA players (450/800 MHz) and allotment of additional spectrum beyond 2x5 MHz.
n We would be closely watching out for the list of pre-qualified bidders which could partly give an indication on intensity of likely aggression in upcoming auctions.
n We continue to believe that incumbent operators remain at an advantage given the strong subscriber base which helps in cross selling, lower incremental cost to upgrade networks to 3G and cost advantage of Rs16.6bn v/s new entrants towards UAS license fees.
n We highlight that simultaneous ascending auction process (similar to that in US & UK) could stretch into too many rounds of bidding especially when it comes to the lesser blocks and/or higher revenue circles. However, we continue to believe that any bidding in excess of Rs42bn (aggregate for 22 circles) would be negative for all the operators, more so for players lacking pan India presence (Refer our earlier report 3G Auction: How much to pay? for details).
n We believe that incumbent operators Bharti Airtel, Vodafone, RCOM, Idea Cellular and Tata Tele would be serious contenders in the 3G auction. Regional /new players like SWAN, Unitech and Aircel may also participate in the auction, but may not contest aggressively due to funding issues and focus on yet to be established 2G business. The details of all qualified bidders to be released by DoT on 9th Jan-09 would give an indication of auction intensity (especially with respect to participation from foreign telcos).
n While we remain bullish on the growth in the telecom sector, Bharti Airtel remains the only BUY (TP Rs1,025) in the sector, in our view.
Showing posts with label Telecom Sector. Show all posts
Showing posts with label Telecom Sector. Show all posts
Monday, December 15, 2008
Telecom Sector - 3G auction guidelines – Incumbents at advantage
3G auction guidelines – Incumbents at advantage
The DoT released the guidelines for auction of 3G spectrum. The key highlights include:
1) Eligibility: Existing license holders and foreign players with 3G experience to be allowed to bid in upcoming auction. Non licensees will have to acquire UAS license prior to the launch of commercial operations, if successful in the auction, which would cost them Rs16.6bn more than the existing players.
2) No of blocks at auction in each circle – No of blocks of 2x5 MHz of 3G spectrum (2.1 GHz ) at auction are; West Bengal - 1, Gujarat & Delhi - 2, HP & UP (w) - 3, Nil in Rajasthan & North east and 4 in the remaining 15 circles.
3) Only one block per participant: Only one block of 3G spectrum (2x5 MHz) and 1 block of BWA spectrum (20 MHz) shall be allotted to any single bidder in a service area. A block of 3G and BWA spectrum each is reserved for MTNL /BSNL at the price to be determined in the auction.
4) No further spectrum release in next 12 months: No further allotment of spectrum (other than currently at auction) is expected within next 12 months. However, if any auction is held within 12 months, the reserve price would then be the auction winning price for that service area.
5) Application deadline 5th Jan-09, Mock auction to be held on 12th & 13th Jan-09 and final 3G auction to commence on 16th Jan-09. BWA auction to begin 2 days after he close of 3G auction.
6) Auction amount to be paid within 15 days: Successful bidders will have to pay the auction bid amount within 15 days, including 25% payment in 5 days from auction.
7) Spectrum to be auctioned via 2-stage simultaneous ascending e-auction method (widely adopted method, also used by US & UK), consisting of
(a) Clock stage – Multiple round bidding process which ends when no of bids left are =< no of blocks. Winning price in each round would be the lowest of the qualified bids. Provisional winning price at end of each round would strictly be higher than in previous round, subject to cap on price increments at 10% of previous bid or 25% of reserve price.
(b) Assignment stage – Among winning bidders for selection of specified frequency blocks.
Our observations and views on 3G guidelines:
n On spectrum usage charge, TRAI and DoT have agreed for 1-2% increase and have discarded 1% incremental charge on 3G spectrum. Also the 3G spectrum is being excluded in determining the slab for calculation of spectrum usage charge, subject to approval by DoT.
n The 8, Metro & Cat ‘A’ circles (high revenue generating circles contributing 60% of industry revenues) and circles with fewer blocks (Delhi, WB, Gujarat) for auction would likely see intense bidding, in our view.
n The guidelines remain silent on 3G spectrum for CDMA players (450/800 MHz) and allotment of additional spectrum beyond 2x5 MHz.
n We would be closely watching out for the list of pre-qualified bidders which could partly give an indication on intensity of likely aggression in upcoming auctions.
n We continue to believe that incumbent operators remain at an advantage given the strong subscriber base which helps in cross selling, lower incremental cost to upgrade networks to 3G and cost advantage of Rs16.6bn v/s new entrants towards UAS license fees.
n We highlight that simultaneous ascending auction process (similar to that in US & UK) could stretch into too many rounds of bidding especially when it comes to the lesser blocks and/or higher revenue circles. However, we continue to believe that any bidding in excess of Rs42bn (aggregate for 22 circles) would be negative for all the operators, more so for players lacking pan India presence (Refer our earlier report 3G Auction: How much to pay? for details).
n We believe that incumbent operators Bharti Airtel, Vodafone, RCOM, Idea Cellular and Tata Tele would be serious contenders in the 3G auction. Regional /new players like SWAN, Unitech and Aircel may also participate in the auction, but may not contest aggressively due to funding issues and focus on yet to be established 2G business. The details of all qualified bidders to be released by DoT on 9th Jan-09 would give an indication of auction intensity (especially with respect to participation from foreign telcos).
n While we remain bullish on the growth in the telecom sector, Bharti Airtel remains the only BUY (TP Rs1,025) in the sector, in our view.
The DoT released the guidelines for auction of 3G spectrum. The key highlights include:
1) Eligibility: Existing license holders and foreign players with 3G experience to be allowed to bid in upcoming auction. Non licensees will have to acquire UAS license prior to the launch of commercial operations, if successful in the auction, which would cost them Rs16.6bn more than the existing players.
2) No of blocks at auction in each circle – No of blocks of 2x5 MHz of 3G spectrum (2.1 GHz ) at auction are; West Bengal - 1, Gujarat & Delhi - 2, HP & UP (w) - 3, Nil in Rajasthan & North east and 4 in the remaining 15 circles.
3) Only one block per participant: Only one block of 3G spectrum (2x5 MHz) and 1 block of BWA spectrum (20 MHz) shall be allotted to any single bidder in a service area. A block of 3G and BWA spectrum each is reserved for MTNL /BSNL at the price to be determined in the auction.
4) No further spectrum release in next 12 months: No further allotment of spectrum (other than currently at auction) is expected within next 12 months. However, if any auction is held within 12 months, the reserve price would then be the auction winning price for that service area.
5) Application deadline 5th Jan-09, Mock auction to be held on 12th & 13th Jan-09 and final 3G auction to commence on 16th Jan-09. BWA auction to begin 2 days after he close of 3G auction.
6) Auction amount to be paid within 15 days: Successful bidders will have to pay the auction bid amount within 15 days, including 25% payment in 5 days from auction.
7) Spectrum to be auctioned via 2-stage simultaneous ascending e-auction method (widely adopted method, also used by US & UK), consisting of
(a) Clock stage – Multiple round bidding process which ends when no of bids left are =< no of blocks. Winning price in each round would be the lowest of the qualified bids. Provisional winning price at end of each round would strictly be higher than in previous round, subject to cap on price increments at 10% of previous bid or 25% of reserve price.
(b) Assignment stage – Among winning bidders for selection of specified frequency blocks.
Our observations and views on 3G guidelines:
n On spectrum usage charge, TRAI and DoT have agreed for 1-2% increase and have discarded 1% incremental charge on 3G spectrum. Also the 3G spectrum is being excluded in determining the slab for calculation of spectrum usage charge, subject to approval by DoT.
n The 8, Metro & Cat ‘A’ circles (high revenue generating circles contributing 60% of industry revenues) and circles with fewer blocks (Delhi, WB, Gujarat) for auction would likely see intense bidding, in our view.
n The guidelines remain silent on 3G spectrum for CDMA players (450/800 MHz) and allotment of additional spectrum beyond 2x5 MHz.
n We would be closely watching out for the list of pre-qualified bidders which could partly give an indication on intensity of likely aggression in upcoming auctions.
n We continue to believe that incumbent operators remain at an advantage given the strong subscriber base which helps in cross selling, lower incremental cost to upgrade networks to 3G and cost advantage of Rs16.6bn v/s new entrants towards UAS license fees.
n We highlight that simultaneous ascending auction process (similar to that in US & UK) could stretch into too many rounds of bidding especially when it comes to the lesser blocks and/or higher revenue circles. However, we continue to believe that any bidding in excess of Rs42bn (aggregate for 22 circles) would be negative for all the operators, more so for players lacking pan India presence (Refer our earlier report 3G Auction: How much to pay? for details).
n We believe that incumbent operators Bharti Airtel, Vodafone, RCOM, Idea Cellular and Tata Tele would be serious contenders in the 3G auction. Regional /new players like SWAN, Unitech and Aircel may also participate in the auction, but may not contest aggressively due to funding issues and focus on yet to be established 2G business. The details of all qualified bidders to be released by DoT on 9th Jan-09 would give an indication of auction intensity (especially with respect to participation from foreign telcos).
n While we remain bullish on the growth in the telecom sector, Bharti Airtel remains the only BUY (TP Rs1,025) in the sector, in our view.
Thursday, December 11, 2008
Telecom Sector - The GSM net-adds continue @ 8mn run-rate
GSM subscribers increase by 8mn during Nov-08
GSM subscriber net-adds for Nov-08 at 7.6mn subs (ex-RCOM) v/s 8.1mn in Oct-08 (7.7mn ex-RCOM) continued to remain strong. Considering RCOM’s GSM net-add run-rate of 0.38mn per month, GSM net-adds for Oct-08 would for the second time clock the 8mn/month mark. The continued strong net-adds by Bharti and Vodafone and increased momentum by Idea Cellular have resulted in strong growth.
Bharti Airtel continued with its strong momentum adding a flat 2.72mn subscribers
Idea & Spice together added 1.3mn (v/s 1.24mn in Oct-08) backed by strong net-adds by Idea (1.23mn) in Mumbai & Bihar Circles.
Vodafone & Aircel report net-adds slightly lower than last month but BSNL improves.
Bharti Airtel continued with its consistency, a monthly net addition of 2.72mn subscribers during Nov-08, similar to that of Oct-08. The net-adds reported continue to remain above our estimate of 2.5mn per month for FY09E.
Idea Cellular added strong 1.24mn subscribers in Nov-08 v/s 1.2mn in Oct-08 driven by healthy additions from the newly launched Mumbai and Bihar circles. Idea added 0.14mn subs from the two new circles of Mumbai & Bihar during the month. Spice’s net-adds at 0.7mn, showed an improvement as compared to 0.04mn during last couple of months. Idea & Spice together added 1.3mn subscribers in Nov-08 v/s 1.24mn in Oct-08.
RCOM has not yet reported any changes in subscribers for the month. However assuming monthly net addition run-rate of 0.38mn the aggregate GSM net additions for Nov-08 would for the second time hit the 8mn/month mark.
Others: Vodafone reported healthy net additions of 2.06mn v/s 2.08mn last month. The strong net-adds by Vodafone continues to bridge the gap in subscriber market share between second largest player RCOM. The difference in subscriber base between the two which was at 1.7mn during Mar-08 has reduced to 1.1mn in Oct-08. Aircel reported slightly lower net-adds of 0.72mn in Nov-08 v/s 0.78mn in Oct-08. BSNL with net adds of 0.68mn continues to show improvement, but is also losing market share.
Overall the industry continues to report strong momentum in subscriber net additions. We continue to remain bullish on the sector with Bharti Airtel as top pick.
GSM subscriber net-adds for Nov-08 at 7.6mn subs (ex-RCOM) v/s 8.1mn in Oct-08 (7.7mn ex-RCOM) continued to remain strong. Considering RCOM’s GSM net-add run-rate of 0.38mn per month, GSM net-adds for Oct-08 would for the second time clock the 8mn/month mark. The continued strong net-adds by Bharti and Vodafone and increased momentum by Idea Cellular have resulted in strong growth.
Bharti Airtel continued with its strong momentum adding a flat 2.72mn subscribers
Idea & Spice together added 1.3mn (v/s 1.24mn in Oct-08) backed by strong net-adds by Idea (1.23mn) in Mumbai & Bihar Circles.
Vodafone & Aircel report net-adds slightly lower than last month but BSNL improves.
Bharti Airtel continued with its consistency, a monthly net addition of 2.72mn subscribers during Nov-08, similar to that of Oct-08. The net-adds reported continue to remain above our estimate of 2.5mn per month for FY09E.
Idea Cellular added strong 1.24mn subscribers in Nov-08 v/s 1.2mn in Oct-08 driven by healthy additions from the newly launched Mumbai and Bihar circles. Idea added 0.14mn subs from the two new circles of Mumbai & Bihar during the month. Spice’s net-adds at 0.7mn, showed an improvement as compared to 0.04mn during last couple of months. Idea & Spice together added 1.3mn subscribers in Nov-08 v/s 1.24mn in Oct-08.
RCOM has not yet reported any changes in subscribers for the month. However assuming monthly net addition run-rate of 0.38mn the aggregate GSM net additions for Nov-08 would for the second time hit the 8mn/month mark.
Others: Vodafone reported healthy net additions of 2.06mn v/s 2.08mn last month. The strong net-adds by Vodafone continues to bridge the gap in subscriber market share between second largest player RCOM. The difference in subscriber base between the two which was at 1.7mn during Mar-08 has reduced to 1.1mn in Oct-08. Aircel reported slightly lower net-adds of 0.72mn in Nov-08 v/s 0.78mn in Oct-08. BSNL with net adds of 0.68mn continues to show improvement, but is also losing market share.
Overall the industry continues to report strong momentum in subscriber net additions. We continue to remain bullish on the sector with Bharti Airtel as top pick.
Telecom Sector - The GSM net-adds continue @ 8mn run-rate
GSM subscribers increase by 8mn during Nov-08
GSM subscriber net-adds for Nov-08 at 7.6mn subs (ex-RCOM) v/s 8.1mn in Oct-08 (7.7mn ex-RCOM) continued to remain strong. Considering RCOM’s GSM net-add run-rate of 0.38mn per month, GSM net-adds for Oct-08 would for the second time clock the 8mn/month mark. The continued strong net-adds by Bharti and Vodafone and increased momentum by Idea Cellular have resulted in strong growth.
Bharti Airtel continued with its strong momentum adding a flat 2.72mn subscribers
Idea & Spice together added 1.3mn (v/s 1.24mn in Oct-08) backed by strong net-adds by Idea (1.23mn) in Mumbai & Bihar Circles.
Vodafone & Aircel report net-adds slightly lower than last month but BSNL improves.
Bharti Airtel continued with its consistency, a monthly net addition of 2.72mn subscribers during Nov-08, similar to that of Oct-08. The net-adds reported continue to remain above our estimate of 2.5mn per month for FY09E.
Idea Cellular added strong 1.24mn subscribers in Nov-08 v/s 1.2mn in Oct-08 driven by healthy additions from the newly launched Mumbai and Bihar circles. Idea added 0.14mn subs from the two new circles of Mumbai & Bihar during the month. Spice’s net-adds at 0.7mn, showed an improvement as compared to 0.04mn during last couple of months. Idea & Spice together added 1.3mn subscribers in Nov-08 v/s 1.24mn in Oct-08.
RCOM has not yet reported any changes in subscribers for the month. However assuming monthly net addition run-rate of 0.38mn the aggregate GSM net additions for Nov-08 would for the second time hit the 8mn/month mark.
Others: Vodafone reported healthy net additions of 2.06mn v/s 2.08mn last month. The strong net-adds by Vodafone continues to bridge the gap in subscriber market share between second largest player RCOM. The difference in subscriber base between the two which was at 1.7mn during Mar-08 has reduced to 1.1mn in Oct-08. Aircel reported slightly lower net-adds of 0.72mn in Nov-08 v/s 0.78mn in Oct-08. BSNL with net adds of 0.68mn continues to show improvement, but is also losing market share.
Overall the industry continues to report strong momentum in subscriber net additions. We continue to remain bullish on the sector with Bharti Airtel as top pick.
GSM subscriber net-adds for Nov-08 at 7.6mn subs (ex-RCOM) v/s 8.1mn in Oct-08 (7.7mn ex-RCOM) continued to remain strong. Considering RCOM’s GSM net-add run-rate of 0.38mn per month, GSM net-adds for Oct-08 would for the second time clock the 8mn/month mark. The continued strong net-adds by Bharti and Vodafone and increased momentum by Idea Cellular have resulted in strong growth.
Bharti Airtel continued with its strong momentum adding a flat 2.72mn subscribers
Idea & Spice together added 1.3mn (v/s 1.24mn in Oct-08) backed by strong net-adds by Idea (1.23mn) in Mumbai & Bihar Circles.
Vodafone & Aircel report net-adds slightly lower than last month but BSNL improves.
Bharti Airtel continued with its consistency, a monthly net addition of 2.72mn subscribers during Nov-08, similar to that of Oct-08. The net-adds reported continue to remain above our estimate of 2.5mn per month for FY09E.
Idea Cellular added strong 1.24mn subscribers in Nov-08 v/s 1.2mn in Oct-08 driven by healthy additions from the newly launched Mumbai and Bihar circles. Idea added 0.14mn subs from the two new circles of Mumbai & Bihar during the month. Spice’s net-adds at 0.7mn, showed an improvement as compared to 0.04mn during last couple of months. Idea & Spice together added 1.3mn subscribers in Nov-08 v/s 1.24mn in Oct-08.
RCOM has not yet reported any changes in subscribers for the month. However assuming monthly net addition run-rate of 0.38mn the aggregate GSM net additions for Nov-08 would for the second time hit the 8mn/month mark.
Others: Vodafone reported healthy net additions of 2.06mn v/s 2.08mn last month. The strong net-adds by Vodafone continues to bridge the gap in subscriber market share between second largest player RCOM. The difference in subscriber base between the two which was at 1.7mn during Mar-08 has reduced to 1.1mn in Oct-08. Aircel reported slightly lower net-adds of 0.72mn in Nov-08 v/s 0.78mn in Oct-08. BSNL with net adds of 0.68mn continues to show improvement, but is also losing market share.
Overall the industry continues to report strong momentum in subscriber net additions. We continue to remain bullish on the sector with Bharti Airtel as top pick.
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