Mukesh wins broadband wireless bid by proxy

Score one more for Big Bro. In a stunningly executed move, Mukesh Ambani’s flagship company, Reliance Industries Ltd (RIL), stormed back into the telecom sector through the back door. He did this by buying up a company called Infotel, which unexpectedly won all 22 circles in the just-concluded broadband wireless access (BWA) auction.

This means telecom will be the first space where Mukesh and his brother Anil will be squaring off for a battle in the marketplace after they agreed to scrap their non-compete agreement last month. Anil Ambani’s Reliance Communications (RCom) had retired midway through the BWA auction process saying the bids had significantly exceeded its business case estimates.

BWA spectrum is needed for offering Wimax services to handheld devices and laptops. Wimax allows companies to offer high-speed internet access, telephony, voice, data and TV services. Ten years after launching a telecom company that was later handed over to Anil as part of the family division of assets, Mukesh re-entered the sector by announcing a deal to buy 95% of Infotel Broadband Services Pvt Ltd. Infotel bid a hefty Rs12,847.77 crore for its 22 circles, about Rs600 crore more than what was paid by Bharti Airtel, India’s No 1 telecom company, for the much-hyped 3G spectrum last month for just 13 circles.

Nobody believes that Infotel, promoted by the Nahata group of Himachal Futuristic fame, would have bid for so many BWA circles without a tacit understanding with Mukesh Ambani.    

Reliance paid Rs 4,800 crore for 95% of Infotel, thus making it a subsidiary company.

While Reliance will now have to spend even more to roll out its services, the industry buzz is that Mukesh Ambani may seek to expand its footprint in telecom by buying a stake in Datacom, a telecom services provider from the Videocon stable.

BWA will fetch a cool Rs 38,543.31 crore for the government from the two private slots auctioned, with the third being reserved for state-owned Bharat Sanchar Nigam Ltd and MTNL. Earlier, the government had raked in Rs 67,710 crore from the 3G auction. This means it has collected Rs 106,253 crore by selling thin air in the two auctions.

Those quitting the BWA race in the middle of the auction were RCom, Vodafone and Idea Cellular. All three had bid aggressively for 3G spectrum, paying Rs 8,583 crore, Rs 11,617 crore and Rs 5,765 crore respectively. Others to withdraw during the initial days of bidding were Tata Communications and Spice Internet.

Out of the 11 bidders in BWA, there were six winners. Infotel (read: Reliance) emerged on top by winning all 22 circles at a bid price of Rs 12,847.77 crore, followed by Aircel with eight circles at Rs 3,438 crore, Tikona with five circles at Rs 1,058.2 crore,

Qualcomm with four at Rs 4,912.54 crore, Bharti with four circles at Rs 3,314.36 crore, and Augere with one circle at Rs 124.66 crore.
The lucrative Delhi and Mumbai circles have gone to Infotel (RIL) and Qualcomm for BWA spectrum. Among other ‘A’ circles, Maharashtra has gone to Bharti and Infotel, Gujarat to Infotel and Tikona, Andhra Pradesh to Aircel and Infotel, Karnataka to Infotel and Bharti, and Tamil Nadu to Infotel and Aircel.

According to Bharti, BWA is an area where multiple technology
platforms are still evolving. “A combination of scarcity of slots and the auction format, once again, resulted in extremely high price levels. The company has secured BWA spectrum in select circles to experiment with new technologies,” Bharti said.