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Qualcomm,Vodafone to Join India Wireless Auction

Stocks in this article: QCOM VOD CHL

Updated since 11:58am EDT to clarify that Qualcomm plans to participate in India's BWA auction.

NEW YORK ( TheStreet -- U.S.-listed companies Qualcomm (QCOM) and Vodafone (VOD) are participating in the 3G and BWA auction currently under way in India.

The auction for 93 licenses across the country to provide third-generation services to the 586 million mobile phone subscribers in India has already reached $11.6 billion, a level beyond the expectations of participants. Further investments to provide 3G services on a commercial basis from September 2010 will likely take the overall company expenditures to irrational levels.

In contrast, total investments to fund construction of third-generation networks in China for the 770 million mobile phone subscribers totaled $23 billion during the first year of operations, according to data release from China Mobile (CHL), China Unicorn (CHU) and China Telecom (CHA).

Qualcomm, a leader in developing and delivering innovative digital wireless communications, has a history of getting involved in spectrum auctions that help the commercialization of its wireless technologies. Participation in India's Broadband Wireless Access auction will help the company in accelerating the use of TD-LTE. Unlike WiMAX, TD-LTE does not have a substantial market share for encouraging vendors to develop devices. India's 2.3 GHz spectrum band and rapidly growing demand for high broadband services is well suited for TD-LTE technology.

Vodafone is the second largest cellular service provider in India and has crossed the landmark of 100 million subscribers in the country in April. Vodafone owns 67% of Vodafone Essar, one of the nine participants for 3G auction, after buying out from Hutchison (HTX) in 2007.

A clear winner in all the circles is unlikely to emerge, as the current 3G prices have surpassed the estimates set by the participants. As smaller entities and new entrants are likely to concentrate on specific circles, an incumbent service provider will find it difficult to win the majority of the circles.

Bharti Airtel, India's telecom giant, is currently utilizing INR80 billion ($1.77 billion) reserves with additional funding plans. Meanwhile, other major industry participants such as Vodafone Essar, Idea Cellular and Tata Communications (TCL) raised INR100 billion ($2.21 billion), INR95 billion ($2.10 billion) and INR85 billion($1.88 billion), respectively to finance the auctions.

Emergence of Bharti Airtel as a winner in the majority of the service areas will further strengthen its presence in the domestic market. The recent Zain deal has placed Bharati Airtel among the world's top 10 telecom companies. With a subscriber base of 163 million worldwide, the company ranks ahead of AT&T (T), Verizon (VZ), NTT DoCoMo (DCM) and T-mobile in the number of subscribers.

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