Spectrum Auction Begins - Telecos Look to Bolster Airwaves

This is probably the most awaited event of the year for the Telecom industry as a whole. The spectrum auction starts today and expect to see a fiery auction bidding for all the telecos involved.

What is Spectrum Auction?

It was discussed before that this is more of a renewal exercise than actual first time sale. The frequencies in the following bands are set to be auctioned off:

• 700 MHz
• 800 MHz
• 900 MHz
• 1.8 GHz
• 2.1 GHz
• 2.3 GHz
• 2.5 GHz

Bharti Airtel and Vodafone Idea already have sufficient frequency bands. Furthermore, only Reliance Jio is expected to have any sort of meaningful impact in this auction as they have submitted the highest amount of earnest money.

The telecos are already up for spectrum renewal in July 2021 so this is being seen as an opportunity to do the same. The details of the renewals, according to CLSA are,

1. Reliance Jio has 81.5MHz of spectrum awaiting renewal in the 800 MHz band across 18 circles. This is crucial for Jio to continue their business seamlessly.
2. Vodafone Idea has a total of 51.2MHz spectrum due for renewal in the 1.8 GHz band across eight circles, and 6.2MHz spectrum in the 900MHz band in the Tamil Nadu circle. The telecom operator has enough backup to rely on should it fail to buy new spectrum in the auction.
3. Bharti Airtel has 51.4MHz spectrum due for renewal in the 1.8 GHz band across eight circles, and 6.2 MHz spectrum in the 900MHz band in the Tamil Nadu circle. As is the case with Vi, Airtel also possesses sufficient airwaves in case it also opts not to go for anything new.

The issue for Vi and Airtel is the massive AGR dues they owe to the Central Government. Even if they would like to take this opportunity to go for new bands to expand into, chances are slim as everyone is prioritizing 5G over 4G. Liquidity is also an issue, but Vi and Airtel have taken steps for the same.

Expectations in the Spectrum Auction

Reliance Jio is expected to be the most aggressive telecom operator in the spectrum. They will buy in 800 MHz to improve their 4G and 900 MHz in prep for 5G. Notably, it might be the only teleco to pick 700 MHz as the band is the most expensive due to its high efficiency.

Bharti Airtel is set to renew all of the frequencies that are due. Besides that, it is also tipped to pick up spectrum across many, if not all, circles in the 2.3 GHz band which is imperative to its 5G ambitions.

Vi is tipped to have a quiet outing, with only renewals in 900 MHz and 1.8 GHz bands in AP and UP. It is also going to surrender frequencies in rest 8 circles in those bands once their permit expires.

The Government is expecting to sell airwaves worth Rs. 4 trillion but the analysts have tipped the government to take away around 10-12% of that amount.

There might not be any takers for the 700 MHz band this time around as well.