The much-awaited auction of 2G spectrum will begin on Monday. It is expected to be a lukewarm affair as out of six new players that were issued licences during the regime of former communications and IT minister A Raja, only two - Videocon and Telenor - will bid for airwaves. Etisalat DB, Loop Telecom, S Tel and MTS are not participating in the auctions.
In the long-term, the market will become less competitive and tariff will go up.
It also means a shake-up in the industry as the licences of these four players will be officially terminated.
The auction will be of spectrum in 1800 MHz band, on which GSM services are provided. There are no bidders for the auction for spectrum in 800 MHz band, which is used by the CDMA operators. Tata Teleservices and Videocon, who had applied for bids, later withdrew from the race.
Even for GSM services, no company will submit bids for airwaves for pan-India operations.
Videocon and Telenor will not bid for more than 10 circles each out of 22 circles in India. This gives some relief to the existing operators as competition in the market has reduced. Idea, Airtel and Vodafone are also participating in auctions.
"Consumers will not have any immediate impact," said Mahesh Uppal, a Delhi-based telecom analyst. "The exit of a few players will not make a difference. There will still be more than six players in a circle. In the long-term, there will be a steady increase in prices."
Low initial response will also have adverse impact on the government's target of raising about Rs. 40,000 crore during the current fiscal from auction and licence fee from the incumbent operators for excess spectrum. With the current response, it will be difficult to raise more than Rs. 10,000 crore during current fiscal.