MUMBAI: A bird in the hand is worth two in the bush. Ahead of the spectrum auctions, some analysts had said Indian telcos will hold back some of their arsenal in the current round of bidding, given that 5G auctions are expected in about a year.
But the bidding on the first day of auctions has taken most by surprise, with telcos deciding to take what’s on offer, rather than wait for the next auction.
The government has already received bids worth Rs77,146 crore, much higher than the anticipated Rs45,000 crore. While some of this pertains to renewal spectrum, a lot of it is for growth.
In a report dated 1 March, analysts at Motilal Oswal Financial Services Ltd said that auction has seen much aggressive response than expected, with total bids already 70% higher than the renewal spectrum requirement across the three telecom providers.
“Reliance Jio will have spent the highest, with 800MHz renewals and 2300MHz capacity spectrum investments. On the other hand, Bharti Airtel Ltd will have spent on 1800MHz renewals, 2300MHz capacity, and some top-up in the 900MHz spectrum. Vodafone Idea Ltd is estimated to have had minimal participation. Based on the earnest money deposits as well, RJio and Bharti are expected to have spent the highest” added the Motilal Oswal report.
The 800 megahertz (MHz) band has seen the highest interest, with bid amount at Rs37,500 crore. The 1800MHz/2300MHz saw bid amounts of Rs18,200 crore and Rs7,100 crore, respectively. The 900MHz has so far received bids worth Rs5,100 crore. Remaining bands, on the other hand, didn’t attract much response.
“Surprisingly, telcos are buying generous amounts of spectrum in the 800Mhz and 1800Mhz band, implying a desire to augment not only coverage, but also service quality,” said an analyst at a domestic institutional brokerage. “The fact that they are buying spectrum in the 1800Mhz band vis-à-vis cheaper spectrum in the 2300Mhz band is also interesting,” he added. By value, about 65% of the spectrum 2300Mhz band has been taken so far.
Recently, concerns had emerged about slowing growth of Jio’s subscriber base, which was said to be the function of capacity constraints in large urban areas. But now that the company seems to be augmenting its 4G capacity, this issue might get addressed to some extent.
Meanwhile, the winner of the auction will be assigned the spectrum for a period of 20 years and will have to shell out a 25% upfront payment in the 700MHz/800MHz/900MHz band and 50% upfront payment in the other bands. The balance amount would be payable in 16 equal annual installments after a moratorium of two years. The auction is expected to conclude today.
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