However, the analysts believe that any over-bidding will hurt the balance sheets of the telecom companies, who have already seen their revenues taking a hit due to increased competition. SMC Capital’s equity head, Mr Jagannadham Thunuguntla, said the telecom industry was already suffering from over capacity and this new investment will put pressure on their balance sheets. He said the industry will see a consolidation in the next 12-18 months.

1. Rising 3G bid price worries investors
April 28th, 2010
New Delhi, April 27: Even though the government is laughing its way to the bank in the 3G
auction, investors in the telecom sector are a worried lot.
The telecom minister, Mr A.Raja, said on Tuesday that the government could rake in revenues of
up to Rs 55,000 crore from the auction of 3G and wireless broadband spectrum.
“The revenue from 3G alone may cross Rs 40,000 crore. The motivation shown by the operators
is remarkable. Revenues from 3G and Broadband Wireless Access (BWA) spectrum put together
may touch Rs 50,000-55,000 crore,” said Mr Raja. He didn’t believe the price of 3G has reached
irrational levels. “It is only some frustrated forces, who have not been able to get spectrum that
are spreading such information,” the minister added.
The price of pan-India 3G spectrum reached Rs 8,662 crore by the end of 15th day of bidding.
This price is 147 per cent higher than Rs 3,500 crore from which the auction had initially started.
However, the analysts believe that any over-bidding will hurt the balance sheets of the telecom
companies, who have already seen their revenues taking a hit due to increased competition.
SMC Capital’s equity head, Mr Jagannadham Thunuguntla, said the telecom industry was
already suffering from over capacity and this new investment will put pressure on their balance
sheets. He said the industry will see a consolidation in the next 12-18 months.
“The telecom industry was an under performer in 2009 and investors should stay out of it for a
while. They will get an opportunity to enter this sector in 12-18 months when the crisis in the
telecom sector will reach its peak,” adds Mr Thunuguntla.
Mr Harit Shah, research analyst at Karvy Stock Broking said the value of pan-India spectrum is
likely to cross Rs 9,000 crore. “It will pinch the balance sheet of the winning company for 3-4
years,” said Mr Shah.