Bharti Airtel EMD for spectrum higher-than-expected, VIL in-line: ICICI Securities

Our Bureau Mumbai | Updated on February 19, 2021

EMD helps understand maximum spectrum payout, as operators can buy spectrum worth 5-7 times of of EMD.   -  V_V_Krishnan

Telecom operators had submitted Earnest Money Deposits for the upcoming spectrum auction, starting March 1

Bharti Airtel’s Earnest Money Deposit (EMD) for spectrum is higher-than-expected and the operator may buy more 2,300 MHz spectrum, while that of Vodafone Idea Ltd (VIL) is in-line with estimates, according to a report by ICICI Securities.

On Thursday, telecom operators Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea submitted EMDs of ₹10,000 crore, ₹3,000 crore and ₹475 crore, respectively, for the upcoming spectrum auction, starting March 1.

Also read Jio, Airtel, Vi put in ₹13,475-crore deposits for spectrum auction

EMD helps understand maximum spectrum payout, as operators can buy spectrum worth 5-7 times of of EMD.

Bharti Airtel’s EMD means its maximum spectrum payout is capped at ₹15,000-21,000 crore and VIL’s EMD enables it to buy spectrum worth ₹3,300 crore. EMD shows operators are unlikely to bid for 700 MHz band, the brokerage firm said.

ICICI Securities was expecting Bharti’s EMD at ₹2,000 crore.

“Bharti may buy more 2,300MHz spectrum, in our view, and it is unlikely to fill sub-GHz gap in this auction. VIL EMD is same as our base case scenario,” it added.

Bharti has sub-GHz spectrum gap in 8 circles, of which, spectrum availability in 900 MHz is only in Tamil Nadu and Madhya Pradesh, the brokerage firm said, adding it expects the New Delhi-based company to buy 5 MHz spectrum in each of these two circles. However, it will still have sub-GHz spectrum gap in six circles, which it may fill in future auctions.

However, this rules out any spectrum demand in 700 MHz band from Bharti. which was largely expected.

Bharti may buy 1,800 MHz spectrum to complete at least 5 carriers in each circles including spectrum in 900 MHz and 2100 MHz band. This will help Bharti in smooth transition to 5G in future using dynamic spectrum sharing. Higher EMD also means, Bharti will may beef-up spectrum quantity up to 40 MHz in many or its all circles.

“This band may be critical for 5G launch in the future, in our view. The higher end of the spectrum payout of ₹21,000 crore will be seen only if Bharti buys 40 MHz spectrum in 2,300 MHz band pan-India, it added.

VIL will have to renew 5 MHz spectrum in expiring 900 MHz band in Tamil Nadu. It will also need 5 MHz spectrum in 1800 MHz band each in Andhra Pradesh and Uttar Pradesh (East). While VIL’s EMD is in-line with expectations, the the total spectrum payout seen is at ₹3,300 crore.

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Published on February 19, 2021
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