India's rush to win 4th mobile licenses

By CNN's Kristie Lu Stout

NEW DELHI, India (CNN) -- India's Department of Telecommunications is overwhelmed by the response for the upcoming fourth cellular license bid.

The Indian government will be awarding licenses for cellular operators in August. Reliance, Bharti, BPL, Birla AT&T, Escotel, HFCL and others have already purchased a total of 24 tender documents for the bid.

Analysts say the introduction of a fourth mobile operator in each designated cellular circle will bring competitive pressure to state-run incumbents MTNL and BSNL, and lower rates for India's 3.7 million mobile users.

Surpassing expectations

The response for the bidding has surpassed the expectations of Indian telecom authorities.

"Contrary to industry predictions, the bidding has generated tremendous response," one DoT official told the Economic Times.

With the exception of mobile group Hexacom, all cellular operators in India have purchased at least one tender document.

Major players in the Indian mobile market include Hutchison, BPL, Bharti and Birla-AT&T-Tata. Reliance is also emerging from its petrochemical legacy as a potential mobile contender.

Analysts say cash-rich mobile players like Bharti, Reliance and Hutchison will fare well in the auctions -- as opposed to BPL.

"BPL is tight on cash, and it will be hard for them to expand," said UBS Warburg's Mazumdar.

In contrast, Bharti last month received an additional equity investment totaling $460 million. The capital injection included $200 million each from SingTel and Warburg Pincus.

With its war chest, Bharti stands to gain an advantage when the Indian government awards licenses for fourth cellular operators in August.

From zero to 3.7 million

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 (2 rupees) per minute on average.

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