1. forum
36 tele.net | August 2016
What are your expectations from the upcom-
ing spectrum auction? What will be the key
dampeners and/or success factors?
Sathish Gopalaiah and Aditya Khaitan
(The views and opinions expressed herein are
those of the author and do not necessarily repre-
sent the views and opinions of KPMG in India.)
With the government’s clearance, the
stage is set for one of the biggest spectrum
auctions in India with approximately
2,300 MHz of spectrum across seven
bands, valued at around Rs 5.66 trillion,
up for grabs. However, we believe that the
balance sheets of telecom service
providers are already leveraged and bid-
ding in this auction might not be as
aggressive as it was in 2015.
The key dampeners envisaged are as
follows:
• Pricing of spectrum: Given the high
reserve price for spectrum in the 700
MHz band, the amount that service
providers need to spend to acquire a 5
MHz block on a pan-Indian basis might
be a deterrent. The value of spectrum in
the 700 MHz band is a significant portion
of the total spectrum value on sale.
• Ecosystem for the newly introduced
bands: Lack of a developed device eco-
system for the 700 MHz and 2500 MHz
bands could hamper bidding.
• Stringent payment conditions: The pay-
ment conditions have been made more
stringent for the above 1 GHz bands –
1800 MHz, 2100 MHz, 2300 MHz and
2500 MHz – with upfront payment
being increased to 50 per cent from the
previous 33 per cent. These factors are
likely to put further pressure on the
already cash-strapped telecommunica-
tion companies.
Factors that will drive spectrum sale
include:
• Opportunity to expand the 3G footprint
and roll out 4G networks: Meeting cus-
tomer demands created by exponential
data growth and improving customer
experience could be the key drivers for
purchase of spectrum in the 1800 MHz,
2100 MHz and 2300 MHz bands.
• Availability of harmonised spectrum:
Spectrum bands are now technology
neutral. Moreover, the availability of
harmonised spectrum in the 800 MHz
and 1800 MHz bands could further
increase interest in these bands.
• Availability of spectrum in 30 days: The
spectrum won in the auction will be
made available in 30 days from the date
of making the payment, facilitating ease
of doing business.
• Reduced lock-in period: The lock-in
period after the fulfilment of the roll-out
obligation has been reduced to one year
from the earlier two years, which will
provide flexibility to operators for trad-
ing/sharing of unused spectrum.
Hemant Joshi
The upcoming spectrum auction with an
Spectrum Hope
Industry awaits upcoming auction for business expansion
The government has finally set September 29, 2016 as the date to kick off the biggest ever spectrum auction in the country. The spec-
trum sale will witness telecom bigwigs fighting it out to acquire spectrum worth around a base price of Rs 5.6 trillion, spread across mul-
tiple bands. Spectrum acquisition in some of the highly efficient bands will enable operators to provide good quality of service (QoS) to
their customers. Further, increased spectrum availability will give a major fillip to the data ecosystem in the country. As the industry gears
up for the upcoming spectrum auction, tele.net seeks analysts’ views on the expected outcome and potential operator strategies…
Director, Telecom Media and
Technology Consulting, KPMG
Aditya Khaitan
Partner and Hea, Telecom Media
and Technology Consulting,
KPMG
Sathish Gopalaiah
TMT India Leader,
Deloitte India
Hemant Joshi
Analyst, Asia Pacific,
Ovum
Inderpreet Kaur

2. forum
37tele.net | August 2016
estimated value of Rs 6 trillion is expected
to be the biggest in the history of the Indian
telecom sector. Reports indicate that this
auction will not be a “do-or-die situation”
for operators. The new spectrum could
provide new business opportunities and
geographical expansion. Spectrum in sever-
al bands will be made available for the first
time in India and is likely to attract many
bidders. The demand will be different for
different spectrum bands.
Inderpreet Kaur
Of the total spectrum that the Telecom
Regulatory Authority of India (TRAI) has
proposed to put on sale in various bands,
only the 2100 MHz, 2300 MHz and 700
MHz bands offer large blocks of contiguous
spectrum that operators will find useful for
providing data-led services. The rest of the
bands have fragmented spectrum, offering
small-quantum blocks. The recent clearing
of spectrum sharing and trading rules
means that operators might choose to opt
for the less pricey spectrum in the 800
MHz, 900 MHz and 1800 MHz bands, in
order to fill the gaps, if any, in their data
spectrum holdings.
The high price attached to the 700
MHz band might further limit operators’
interest, keeping in view the huge debts
that they are carrying their balance sheets.
TRAI has decided to opt for the Asia-
Pacific Telecommunity (APT) 700 fre-
quency division duplex (FDD) for deploy-
ing long term evolution (LTE) services as
this plan has been widely adopted globally.
However, the limited availability of LTE
user devices may also dampen operator
interest in the band.
Which band(s) do you believe will be the most
sought after by the players and why? What is
the near-term scope of service roll-out and
adoption in the 700 MHz band in India?
Sathish Gopalaiah and Aditya Khaitan
The 1800 MHz, 2100 MHz and 2300
MHz bands could generate a fair amount
of interest in the auction.
• With technology neutrality, the 1800
MHz band will be utilised for FDD-
LTE deployment. Key drivers for the
uptake of this band include utilising it
for LTE coverage requirements and
supporting the existing subscriber base
(2G and 3G). Availability of harmonised
1800 MHz spectrum would increase ser-
vice providers’ interest in the band.
• The 2100 MHz band is among the most
important bands for 3G in India.
Despite the introduction of 4G, opera-
tors are still in the process of enhancing
the coverage and capacity of their 3G
networks. This is likely to drive the
uptake of this band.
The 2300 MHz band, which supports
TD-LTE and has a well-developed
device ecosystem may witness high par-
ticipation by service providers looking to
expand their LTE networks. For the 700
MHz band, the high reserve price of the
spectrum is expected to be a major deter-
rent. Even if the band is selectively picked
by operators in specific circles, the exist-
ing ecosystem could impact the near-
term scope and service roll-out, and spec-
trum might remain underutilised.
Hemant Joshi
Spectrum in the 1800 MHz, 2100 MHz
and 2300 MHz bands will be the most
sought after, because of the advantage of an
already developed ecosystem for them.
Further, these bands provide possibilities
for business and geographical expansion to
major operators.
Spectrum in the 700 MHz band is
priced 40 per cent higher than that in the
1800 MHz band because of its greater
efficiency. Although there is great poten-
tial for the 700 MHz band, in terms of
global opportunities, it could attract
fewer bidders because its ecosystem is
still underdeveloped.
Inderpreet Kaur
For LTE, the 700 MHz band offers better
coverage and more in-building penetra-
tion than any other band. Importantly,
deploying LTE in the 700 MHz band
lowers capex requirements compared to
the 2100 MHz and 2300 MHz bands.
However, with the current market condi-
tions and high pricing linked to the 700
MHz band, operators might show less
interest in it. The regulator has become
more stringent about network quality and
call drops, and operators are expected to
adopt a balanced approach while planning
investments in spectrum acquisition and
ongoing network expansion.
Although the APT 700 FDD band
plan has been adopted in over 40 coun-
tries, only a handful of devices are capable
of supporting LTE in this band. Also, 4G
is still at a nascent stage in India and it will
not account for a substantial share of the
country’s total mobile subscribers before
2017-18. All this means a long wait for the
700 MHz band to become mainstream.
What should be the key considerations/
strategies for operators for participating in
this auction?
Sathish Gopalaiah and Aditya Khaitan
The key considerations for players par-
ticipating in the auction should be:
• Existing network state, growth projec-
tions and spectrum needs
• Bridging network gaps in the 3G net-
work to enable pan-Indian roll-out
• 4G roll-out and expansion
• Availability of harmonised spectrum in
the 800 MHz and 1800 MHz bands
• Pricing of the spectrum on auction
• Business case for spectrum with poten-
tial return on investment
• Device ecosystem for the new bands.
“The spectrum won in the auc-
tion will be made available in
30 days from the date of mak-
ing the payment.”
Sathish Gopalaiah and Aditya Khaitan
“Reports indicate that this
auction will not be a ‘do or
die situation’ for operators.”
Hemant Joshi
“The future growth in telecom
revenues will be driven by
data services.”
Inderpreet Kaur

3. forum
The primary focus of operators should
be on bridging the gaps in existing 3G net-
works, and coverage and capacity enhance-
ments to enable a pan-Indian 3G network,
delivering the desired customer experience
to voice and data users. To keep up with the
exponential data growth and tap into this
key revenue driver, operators should also
focus on simultaneously rolling out their
4G network in urban areas to lewrage the
revenue opportunity.
Operators might be very selective in
bidding for the 700 MHz and 2500 MHz
bands, considering the underdeveloped
device ecosystem and pricing for the 700
MHz band.
Hemant Joshi
Operators need to be careful while bidding
as there are a variety of spectrum bands
available for auction. Although the 700
MHz ecosystem is underdeveloped, opera-
tors could gain the first-mover advantage in
this highly efficient band. Geographical
expansion will be a key consideration and
operators may consider the chances of
future consolidation while bidding for spec-
trum. Debt burden will be a deciding factor
and the ongoing call drop issue will encour-
age operators to bid for more spectrum.
Also, the possibilities offered by new and
innovative technologies like internet of
things, machine-to-machine and cloud-
based services will be contributing factors
in operators’ bidding decisions.
Inderpreet Kaur
An operator’s decision to participate in the
upcoming auction would be influenced by
the following factors:
• Industry consolidation: The industry
has moved ahead on the path to consoli-
dation and Ovum expects India to
emerge as a market with five to six play-
ers over the next few years. Operators
would consider their future and role in a
highly consolidated market before
charting their spectrum requirements.
• Long-term industry outlook: India is
moving away from being a voice market
and the future growth in telecom
revenues will be driven by data services.
Looking at the long-term strategy, oper-
ators cannot afford to fall short on data
spectrum, be it for 3G or 4G services.
Having said that, the current auction
will see selective bidding, with operators
trying to fill the in gaps in their existing
3G/4G spectrum portfolios.
• Incumbent operators’ position against
Reliance Jio (RJIL): Incumbents have
been working on widening their broad-
band spectrum assets in order to match
the capacity of RJIL. For instance, Bharti
is already looking at acquiring additional
2300 MHz and 1800 MHz spectrum from
Aircel and Videocon is planning to extend
its 4G coverage to all the 22 circles.
Based on your expectations, how do you
see the overall industry dynamics change
after the conclusion of the auction? What
can be the potential impact on various
stakeholders, including the end-user?
Sathish Gopalaiah and Aditya Khaitan
The consolidation that commenced with
the spectrum trading/sharing policy
being formalised is likely to continue.
Stressed balance sheets and high debt are
expected to drive the consolidation. This
could enhance market shares, which in
turn will drive growth and profitability
through volumes.
Considering the spectrum on auc-
tion, operators will have sufficient band-
width to ensure QoS in their networks.
The spectrum acquired could drive 4G
roll-out and expansion, and help in
enhancing 3G network coverage and
quality. In line with the trends in data
revenue and usage, customers might wit-
ness improved data plans and higher data
speeds. The additional spectrum obt-
ained by operators could also help
resolve issues pertaining to network
quality, the lack of which leads to call
drops and degraded voice quality.
Hemant Joshi
Among the issues plaguing the Indian
telecom sector, poor QoS, call drops, etc.
reflect the lack of contiguous spectrum.
Operators are trying to utilise the
available spectrum to serve the second
largest telecom market in the world. The
spectrum auction is likely to change
industry dynamics and give a chance to
operators to improve their QoS. The
additional bandwidth will enable them to
improve the presence of data-based ser-
vices like 3G and 4G and ultimately allow
them to provide innovative services to
end-users. For end-users, there could be
significant improvement in network
availability, and call continuity services in
more regions.
On the other side, the debt of operators
will certainly go up and could bring the sec-
tor closer to consolidation. In addition, it
will accelerate the entry of mobile virtual
network operators in the ecosystem that has
been pending for a while. ▲
38 tele.net | August 2016