How Operators Stack Up After Telecom Spectrum Auction
A woman talking on her mobile phone (Photographer: Dhiraj Singh/Bloomberg)

How Operators Stack Up After Telecom Spectrum Auction

India received bids for Rs 77,815 crore worth of spectrum as telecom operators strengthened 4G capacity and focussed on 5G rollout.

The Department of Telecommunications had offered 2,309-megahertz spectrum in seven bands worth Rs 3.98 lakh crore at the reserve price, according to a statement. But the DoT received bids for 855.6MHz.

In the 2016 auction with seven bidders, of the total airwaves put on auction, 41% by quantity and 12% by value were sold, according to the statement. This time those numbers were 37% and 19%, respectively, with three participants.

Here’s a snapshot of what was sold at the two-day auction that ended on Tuesday:

  • 855.6MHz spectrum sold for Rs 77,815 crore
  • Bids received in 800MHz, 900MHz, 1,800MHz, 2,100MHz, and 2,300MHz bands.
  • No activity was visible in 700MHz and 2,500MHz bands; the operators stayed away from the 700MHz band due to high pricing.
  • The 3,300-3,600MHz or the 5G spectrum band was not offered in the auction.

Who Bought What

Reliance Jio

Billionaire Mukesh Ambani-controlled operator was most aggressive among the three operators and placed bids for 488.53MHz spectrum worth Rs 57,123 crore. The carrier acquired airwaves in three bands: 800MHz, 1,800MHz, and 2,300MHz bands.

Jio’s 81.5MHz of spectrum, including airwaves acquired from Reliance Communications Ltd., due for renewal across 18 circles in 800MHz frequency. It renewed all the expiring spectrum. It also acquired:

  • 134MHz in the 800MHz band.
  • 75 MHz in 1,800MHz band.
  • 280 MHz in 2,300MHz band.

“Through this acquisition, Reliance Jio’s total owned spectrum footprint has increased significantly, by 55%,” the company said in a statement.

According to a Credit Suisse report, Reliance Jio bid aggressively to bridge the gap between spectrum market share and subscriber market share as it was facing network constraints with strong user growth in the last three years. “Over the medium term, the company will have to take price hikes to support network investments and upcoming 5G rollout.”

Bharti Airtel

The operator placed bids for 355.45MHz spectrum worth Rs 18,699 crore. It acquired spectrum in five bands 800MHz, 900MHz, 1,800MHz, 2,100MHz, and 2,300MHz.

The company had 51.4MHz spectrum due for renewal in 1,800MHz frequency in eight circles and 6.2MHz spectrum in 900MHz frequency in Tamil Nadu.

  • Bharti Airtel acquired 71.6MHz in the 1,800MHz band across 13 circles.
  • In the 900MHz band, Bharti Airtel acquired 32.6MHz of spectrum across nine circles including Uttar Pradesh East, West Bengal, Bihar and Odisha where the spectrum will be due for renewal in 2024.
  • In Tamil Nadu circle, it acquired 5MHz out of 6.2MHz that was due for renewal.
  • It didn’t acquire spectrum in some circles like Mumbai, Maharashtra, and Haryana in the 1800MHz band which is up for renewal.

Credit Suisse said Bharti Airtel has strategically optimised its spectrum holdings by letting go of spectrum expiring in select circles (900MHz and 1,800 MHz) and has instead completed a pan-India sub-GHz footprint on liberalised spectrum by adding in 900MHz and 800MHz bands.

“The company has secured pan-India footprint of sub-GHz spectrum that will help improve its deep indoor and in building coverage in every urban town,” according to Bharti Airtel’s media release. “The acquired spectrum will enable Airtel to deliver 5G services in the future and will also help improve its coverage in villages by offering the superior Airtel experience to an additional 90 million customers in India.”

Vodafone Idea

The company bid for 11.8MHz spectrum for Rs 1,993.4 crore. It purchased spectrum in two bands including 900MHz and 1,800MHz.

Vodafone Idea had a total of 51.2MHz spectrum due for renewal in 1,800MHz frequency across eight circles, and 6.2MHz spectrum is due for renewal in the Tamil Nadu circle in 900MHz frequency.

  • The company partially renewed the 5MHz spectrum in the 900MHz band in Tamil Nadu, and 0.8MHz in West Bengal.
  • It acquired 4 MHz in Karnataka, 0.6 MHz in UP (West), and 1.4 MHz in UP (East) in the 1800 MHz band.

“Vi has strong spectrum holding in mid-band (1,800/2,100MHz) and has much lower data throughput,” ICICI Securities said in a report. “Thus, the spectrum requirement itself was very low and high leverage is also a big barrier for any generous investment.”

BNP Paribas said in a report that the auction bid placements should further strengthen Bharti Airtel and Reliance Jio, both of which remain well-positioned to gain market share from Vodafone Idea. “With large investments in network, tariff hikes are inevitable.”

According to a Goldman Sachs report post-auction, Bharti Airtel’s net debt-to-Ebitda rose to 3.5 times from 3 times (as of December 2020), while for Reliance Jio, the ratio increased to 2.7 times from 0.7 times. Potentially lower capex and higher market share in the medium term could offset this negative impact, it said.

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