Reliance buys 95% stake in Infotel
By Erika Kinetz |
June 12, 2010, Saturday
|
Print Edition
Print Edition
RELIANCE Industries is to pay 48 billion rupees (US$1 billion) for a 95 percent stake in Infotel Broadband, the only company to win pan-India broadband wireless spectrum in a government auction yesterday.
The announcement from India's most valuable company came hours after the government closed the 16-day bidding process, which the Press Trust of India said yielded 383 billion rupees in spectrum fees.
The revenue is in addition to the US$14.6 billion India raked in from third-generation spectrum auctions less than a month ago and could help plug the nation's fiscal deficit.
But spiraling costs and fierce competition have players worried. Profit margins are shrinking in India's fast-growing but crowded telecom sector, where 15 operators have driven the cost of calls down to less than 1 cent a minute in some places.
Proposed regulatory changes that would levy hefty fees on existing players and further restrict consolidation among dominant companies have also caused jitters.
Two of India's largest operators -- Vodafone and Reliance Communications -- dropped their bids as prices rocketed.
Vodafone said prices "went beyond rational levels." Reliance Communications said "auction prices significantly exceeded its business case estimates."
Unlisted Infotel agreed to pay 128.5 billion rupees for pan-India spectrum. The broadband spectrum can be used for data services -- like connecting a computer to the Internet wirelessly -- but not for mobile phone voice calls.
"When bid prices started to get higher we realized we needed to talk to a strategic partner," Infotel said.
The announcement from India's most valuable company came hours after the government closed the 16-day bidding process, which the Press Trust of India said yielded 383 billion rupees in spectrum fees.
The revenue is in addition to the US$14.6 billion India raked in from third-generation spectrum auctions less than a month ago and could help plug the nation's fiscal deficit.
But spiraling costs and fierce competition have players worried. Profit margins are shrinking in India's fast-growing but crowded telecom sector, where 15 operators have driven the cost of calls down to less than 1 cent a minute in some places.
Proposed regulatory changes that would levy hefty fees on existing players and further restrict consolidation among dominant companies have also caused jitters.
Two of India's largest operators -- Vodafone and Reliance Communications -- dropped their bids as prices rocketed.
Vodafone said prices "went beyond rational levels." Reliance Communications said "auction prices significantly exceeded its business case estimates."
Unlisted Infotel agreed to pay 128.5 billion rupees for pan-India spectrum. The broadband spectrum can be used for data services -- like connecting a computer to the Internet wirelessly -- but not for mobile phone voice calls.
"When bid prices started to get higher we realized we needed to talk to a strategic partner," Infotel said.
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