Telecom Giant Vodafone suffers from "Winner's Curse" of India's 3G auctions

India suffers from high population density making mobile spectrum a scarce and valuable resource for the 12-13 telecom companies operating in India.Even Vodafone which is the 2nd largest telecom operator  in the world has not been immune from these brutal auctions .The prices  have been bid so high as to make even the government worried whether some companies might not just forfeit the earnest money without paying the full value of the bids. In its recent report it has taken a hit to its results with a huge impairment charge of $3.3 billion on this account.India has proved to be an irresistible market for telecom companies around the world with 500 million people still without a phone.Considering that most people in the world already have a connection outside of India and Africa,it makes sense for saturated telcos to target these two places. But it has been hard going in India because of severe competition,price wars and now high spectrum costs.

Vodafone meets forecasts but takes hit on India – Mint

Vodafone Group Plc, the world’s second largest mobile operator by revenue, posted full-year earnings in line with forecasts on Tuesday and raised its dividend policy despite taking a hit on its key Indian business.The UK-based group, which has 341 million subscribers including its share of those from affiliates, said it would take an impairment charge of £2.3 billion ($3.3 billion) on its fast-growing Indian unit after facing new licence costs.Higher spectrum costs in India and a fierce price war in the market had weighed on Vodafone ahead of the results, but its financial performance for the year was either in line or slightly ahead of forecasts.

Most analysts had expected all-India spectrum to cost between $1.3 billion to $2 billion.The third generation, or 3G, spectrum would allow firms to offer high-speed Internet and other premium services in the highly competitive market, which would prove highly attractive to major operators.But on top of the auction, the Indian telecom regulator has called for mobile operators to pay a one-time fee for the 2G radio spectrum with high bandwidth which they won several years ago, a move that has drawn fierce criticism from all involved.The combination could put pressure on Vodafone’s cash generation and raises the stakes for operators who will still have to spend billions more on equipment to build 3G networks in a market where call rates are among the cheapest in the world.