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Jio, Airtel, Vodafone - Who will win Spectrum Auction War?

Dynamic Equities Pvt Ltd | 03 Oct, 2016  | Follow Author | Add to my Favourites 
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The largest ever spectrum auction of India kick started by receiving bids of Rs 53,531 crores on Day 1. Leading Indian telcos of the nation including Bharti Airtel, Vodafone India, Idea Cellular and newest kid of the block who shook the very foundation of its existing peers, Reliance Jio Infocomm, set the ball rolling on day one of the largest ever spectrum sale with a high bid, though the coveted 700 Mhz bandwidth has not seen any interest.

The ruling giants of the telecom sector Bharti Airtel, Vodafone India and Idea Cellular are all pitted against the newcomer Reliance Jio Infocomm battle for airwaves to boost their high-speed data services in the world’s second-biggest market by mobile phone subscriptions.

What drew the Maximum Attention?

The coveted 700 Mhz bandwidth didn’t see any interest.

The ones in the demand were 1800 Mhz and 2300 Mhz bands - both used for 4G. These saw the most bidding interest after five rounds of bidding on Saturday, 1st October 2016, according to data issued by the telecom department on the same day.

The 2300 Mhz hit the market for the first time since its sale in the year 2010. This was among the most sought after with a three-cornered fight between the giants- Reliance Jio, Airtel and Vodafone, all vying for the 4G bandwidth which gives large coverage. The band drew bids worth Rs 15,390 crores, a source familiar with the auction said, which just over a third of the total is bid value.

The 1800 Mhz saw intense bidding in the Mumbai and Maharashtra circles, a zone where Tata Teleservices’ unit Tata Teleservices Maharashtra’s airwaves are coming up for  renewal in the year 2017. Other circles including Haryana, Kolkata, Rajasthan as well as Uttar Pradesh East too, witnessed excess demand.

The other 4G band, 800 Mhz – saw bids leading to excess demand in only four circles namely, Gujarat, Punjab, Rajasthan and Uttar Pradesh East. Demand was unenthusiastic in the 2100 Mhz band, primarily used for providing 3G services in the country, and one where top telecoms such as Bharti Airtel, Vodafone and Idea Cellular are looking to plug coverage gaps.

The 2500 Mhz band too witnessed limited demand, with telecoms using it as a backup in case the 2300 Mhz band price goes high.

The premium band of 700 Mhz which is to be auctioned at a reserve or base price of Rs 11,485 crores per Mhz did not get a warm welcome. The cost involved of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band which is used for the 3G services.

What to expect from today?

Today (Monday) each round will be of 60 minutes as compared to the 90 minutes round held on Monday.

According to Prashant Singhal, global telecom leader, the auction is on the expected lines. The auction saw no bidding interest on 700 MHZ and 1800 MHZ and that too in the circle where some shortage has been witnessed. One should see some intensity over the next day or so and closure of the auction within the next week.

The Largest Spectrum Auction

India has put on sale the largest-ever spectrum where mobile airwaves are worth Rs 5.63 lac crores. As much as 2,354.55 megahertz (MHz) of frequencies amounting to more than the cumulative spectrum holding of the top four operators – were put up for auction in  seven bands including the 4G bands of 700 Mhz, 800 Mhz, 1800 Mhz, 2300 Mhz and 2500 MHz, as well as 3G bands of 900 Mhz and 2100 Mhz.

According to the set rules, companies winning spectrum in higher frequency bands - above 1 Ghz like 1800 Mhz, 2100 Mhz, 2300 Mhz – are suppose to make 50 per cent upfront payment and the rest of it in 10 years after a 2 year moratorium. In earlier auctions, companies were given the option to make an upfront payment of 33 per cent. For spectrum below 1 Ghz band such as 700 Mhz, 800 Mhz as well as 900 Mhz, the companies will require to pay 25 per cent upfront and the rest of the amount in 10 years after a 2 year moratorium.

The Government has fixed a pan-India reserve price of Rs 2,873 crores for spectrum in 1,800 MHz band, Rs 3,341 crores for 900 MHz, Rs 5,819 crores for 800 MHz, Rs 3,746 crores for 2,100 MHz, Rs 11,485 crore for 700 MHz and Rs 817 crores each for 2,300 MHz and 2,500 MHz bands.

The sale has resumed today, however we will not get anymore carrier-specific bidding data until the end of the auction from the DoT (Department of Telecom).

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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