Bharti, Hutch lead India's mobile bids

By Staff and wire reports

NEW DELHI, India (CNN) -- Indian telecom firm Bharti and a unit of Hong Kong's Hutchison Telecom have emerged as the most aggressive bidders in India's fourth cellular license bid.

Last month, the Indian government received 57 initial bids from seven companies for the right to be the fourth cellular operator in India's 21 telecom zones.

The licenses are being auctioned after a gap of nearly five years and offer private firms their last chance to expand their presence in the fast-growing high-profile mobile business.

Top bidders

Bharti looked set to win the license for Madhya Pradesh as it was the only bidder for it.

"We have decided to award licenses to the sole bidders as they have emerged winners in the open competition," a Department of Telecommunications official told the Economic Times.

Barakhamba Sales & Services, a consortium of Hutchison Telecom and India's Essar group, bid $100.8 million for four licenses and it was the highest bidder in all of them.

The government hopes to award the licenses by the end of August after a three-stage bidding process. The highest bid in the first round of financial bidding will serve as the reserve price for the next two bidding rounds.

The Reliance group bid for 15 licenses for $109.3 million but its bids were the highest only in New Delhi where it bid $19.1 million for the license.

Birla-AT&T-Tata was out of the race for the Karnataka license as its bid was the lowest of four. Bidding rules only allow the top three bidders to go into the next round.

The company, which recently unveiled plans to merge with telecom firm BPL Communications to create India's largest mobile company, has bid for the New Delhi, Madras and Karnataka licenses.

Short of expectations

Analysts said the bid amounts fell short of expectations and reflected concerns about the viability of the fourth operator in the highly competitive business.

"The bids are below expectations. We had expected the metro markets (four main cities) to attract bids worth at least $50-60 million each," a European investment bank official told Reuters.

In sharp contrast, in the two most attractive markets of Bombay and New Delhi, the highest bids were $43.18 million and $19.1 million respectively.

India's mobile market has surged 89 percent in the last year to reach a total of 3.7 million subscribers by the end of April 2001.

The Cellular Operators' Association of India (COAI) said the growth in usage stems from a more favorable licensing environment that in turn encouraged a fall in airtime rates.

Cellular rates in India have fallen by 50 to 75 percent over the last two years to hit a current rate of about $0.04 per minute on average.

Industry watchers say rates will drop even more when additional competition is introduced after the August cellular license auctions.

Reuters contributed to this report.