Telecom Spectrum Auctions: All You Need To Know

India will kick-start a telecom spectrum auction from March 1, sans the much talked about 5G bands.The government will put on the block a total of 2,309 megahertz spectrum across seven bands—700MHz, 800MHz, 900MHz, 1,800MHz, 2,100MHz, 2,300MHz and 2,500MHz, according to a notice issued by the Department of Telecommunications in January. At reserve prices, the government expects to raise Rs 3.98 lakh crore, if all bands are successfully sold.The auctions, according to the DoT notice, would be held simultaneously across the seven bands, and the spectrum would be valid for 20 years. The upcoming auction will also include the spectrum due for renewal in 2021. The maximum quantity of spectrum up for grabs is in the 700MHz band, followed by the 2,300MHz frequency, while the lowest is offered in the 900MHz band.The 3,300-3,600MHz band or the 5G spectrum, however, won’t be offered..Goldman Sachs expects bidding to remain muted in the upcoming auction. Telecom operators, it said in a report, are likely to conserve capital for the potentially near-term 5G spectrum auction.Analysts at Goldman Sachs and ICICI Securities expect no bidding in the 700MHz band, also popular for 5G, due to the high reserve price. The government is offering the 700MHz band at a pan-India price of Rs 6,581 crore per MHz.“The 700MHz band was completely unsold during the 2016 auctions, and we expect a similar outcome in 2021 despite a 43% price drop. This is because operators are unlikely to diversify into a new spectrum band that would require incremental investment in equipment when other sub-GHz bands are available at lower prices,” Goldman Sachs said in its report..Telecom Sector Sees Rise In ARPU, Users In Q3. For Vi, It Only Masks Troubles.Pricing And PaymentsThe government has reduced reserve prices for the 700MHz and 800MHz bands by 43% and 18.5%, respectively, compared to 2016 auctions. Reserve prices for the 1,800MHz and 2,300MHz bands, however, have been raised by 14.5% and 17.5%, ICICI Securities said in a report.The brokerage, however, expects that the final auction prices across spectrum bands will be close to reserve prices because of significant spectrum supply and likely limited demand for expiring frequencies..The total earnest money deposited by the final bidders is Rs 13,475 crore, according DoT. Of this, Reliance Jio Infocomm Ltd. deposited Rs 10,000 crore, followed by Bharti Airtel Ltd.’s and Vodafone Idea Ltd.’s Rs 3,000 crore and Rs 475 crore, respectively.Telecom operators, according to ICICI Securities, can buy spectrum worth five-seven times the earnest money deposit. That means Bharti Airtel can buy spectrum worth Rs 15,000-21,000 crore, while Vodafone Idea at most Rs 3,325 crore. With the highest earnest money deposit, Reliance Jio will be the most active bidder and can buy spectrum worth Rs 50,000-70,000 crore, the brokerage said.The successful bidders, according to the DoT notice, will be provided a deferred payment option, with an upfront payment of 50% of the final bid amount in the 1,800, 2,100, 2,300, and 2,500MHz bands, and 25% in the 700, 800 and 900MHz bands. The telecom operators would get a moratorium for two years. The balance amount needs to be paid in 16 equal annual installments at an interest rate of 7.3% per annum. The rate was 9.3% in the previous auction.Spectrum RenewalBharti Airtel has 51.4MHz spectrum due for renewal in the 1,800MHz frequency across eight circles, and 6.2MHz spectrum in the 900MHz frequency in the Tamil Nadu circle, according to CLSA.Vodafone Idea, CLSA said, has a total of 51.2MHz spectrum due for renewal in the 1,800MHz frequency across eight circles, and 6.2MHz spectrum in the 900MHz band in the Tamil Nadu circle.Reliance Jio has 81.5MHz of spectrum (including that of Reliance Communications Ltd.) coming up for renewal in the 800MHz frequency across 18 circles.At the reserve prices, CLSA said the renewal will cost Bharti Airtel Rs 13,848 crore, while Vodafone Idea will have to spend Rs 10,157 crore to renew its entire spectrum. Reliance Jio will have to spend Rs 20,519 crore to renew its spectrum, the research firm said in its note.According to Goldman Sachs, Bharti Airtel will try to improve its footprint in the sub-GHz spectrum and may bid for the 800MHz band in a few service areas. Reliance Jio is expected to comfortably renew its entire spectrum at reserve prices. Vodafone Idea, the financial services provider said, will have a muted participation due to its adequate spectrum footprint and stretched balance sheet (26 times net-debt-to-Ebitda).Bharti Airtel, ICICI Securities said, has amassed a huge spectrum via M&A’s, which should significantly lower its renewal requirement in the upcoming auction..Government Approves Rs 12,200 Crore PLI Scheme For Telecom Equipment

Telecom Spectrum Auctions: All You Need To Know

The government will put on block a total of 2,309 megahertz spectrum across seven bands from March 1, 2021.

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