After shutting operations in 10 circles, last month, MTS Sistema Shyam Tele Services Ltd bid for 8 circles in the Auction. The spectrum won by SSTL in eight circles is technology neutral and valid for 20 years. The company would be required to pay INR 36.4bn for the license period.
The 800MHz auction conducted on Monday, (March 11), saw a tepid response from the lone applicant, Sistema Shyam TeleServices (SSTL). It bid for 24 blocks in eight circles including Delhi out of the 64 blocks put up for auction. It let go 3 circles, namely, Mumbai, Maharashtra and Uttar Pradesh (East) of the eleven in which it’s licenses were cancelled. The total auction bid by it amounted to INR36.4bn
What was MTS Sistema’s Bidding Strategy ?
SSTL’s has scaled down operations in circles which are low revenue contributors and hold less than 1% market share. The 13 closed down circles together contribute 1/4th revenue and hold 0.5%/1% RMS/SMS. With mere 0.5% subscriber market share and about 1% revenue market share in the 13 circles, closure of these circles may not have any major decline in the competitive intensity in these areas.
The closure in Mumbai, Maharashtra and UP East would however imply tapering of some competition; but, there are still about 8-9 players in majorty of the Metro and A circles with about 4-5 players owning less than 10% market share.
While the license renewal for Delhi, Kolkata and Mumbai is due from 2014 onwards, going by tepid response for the Nov, 2012 (1800 MHz) and today’s auction in the 800MHz spectrum there could be a reduction in base prices going forward. Any further reduction will be positive for the incumbents.
3G & CDMA would complement rather than compete – CDMA data is better for large screen, which has higher usage, given cheaper data rates while 3G is better for small screen where it has a wider ecosystem of handset and also a much higher % of subscriber base