Spectrum Auction: Key takeaways after bidding on Day 1

Our Bureau Mumbai | Updated on March 02, 2021

The first day of spectrum auction, on Monday, saw bids worth ₹77,100 crore. While the details of which operator has bid for which frequency band is yet to be disclosed by the Department of Telecom, here are the key takeaways from what we know:

There is no competitive bidding for any spectrum. The bids so far are at the reserve price. This means that the operators have gone in with a clear strategy on how much spectrum they want to acquire and the bidders have not indulged in undercutting each other’s plan.

The bidding activity is concentrated in 800 Mhz and the 2300Mhz bands. This indicates that Reliance Jio is buying 800 Mhz to bolster the spectrum it acquired from Reliance Communications. Jio already has substantial holding in the 2300Mhz band so it could be reinforcing its holding here as well. Bharti Airtel seems to be going after the 900Mhz and 2100Mhz bands.

JIO’s bid is higher

According to analysts at IIFL, Jio’s bid is worth ₹53,300 crore, Airtel is spending ₹22,300 crore and Vi has bid for spectrum worth ₹1,500 crore.

“ JIO’s bid is much higher than expected, suggesting that grabbing as much of 850 Mhz as possible was the goal despite very high reserve prices and little competition in bidding. We estimate JIO will narrow the spectrum gap with Bharti a bit. The auction so far would encourage the government not to cut reserve prices in a hurry despite a lot of unsold spectrum,” IIFL said in a research note.

In the 850MHz band, 69 per cent of supply found bidders and 19 circles saw bids. It saw bids worth ₹37,500 crore. Jio’s renewal of Reliance Communiactions spectrum would have cost ₹22,500 crore at reserve price. Assuming Bharti did not bid for large quantities of 850 Mhz, it suggests that JIO has bid for substantial chunks in addition to renewal. In the 900MHz band, 34 per cent of supply was bid for and in nine circles.

“We expect Vi to have renewed 900 in TN for ₹1,500 crore. Out of the ₹7,600-crore total bid value, Bharti may have bid for the rest as it seeks to achieve pan India sub-1GHz footprint,” IIFL said.

2300Mhz, the key band for Bharti and Jio for capacity augmentation, saw bids in all 22 circles with bids for 65 per cent of supply. The value of spectrum bid for was ₹13,200 crore. This is a bit surprising since 2300MHz base prices were significantly below 1800/2100MHz, so one would have expected this band to see heated bidding before attention turned to 1800/2100.

In the 1800MHz, 33 per cent of supply found bidders and in 21 circles, which was more than expected considering that the significantly cheaper 2300MHz band was not sold out.

There were no takers for spectrum in the premium 700 MHz and 2500 MHz bands.

Analysts at Axis Capital estimated that bidding by Airtel would be for ₹25,000 crore, Vi to be ₹7,000 crore and by RJio to be ₹42,000 crore.

“Airtel and Vi had spectrum expiring mostly in the 1800 MHz band (less expensive relatively) across eight circles. However, they do not seem to have renewed the entire spectrum, as they have backup airwaves available with more spectrum. As per the data available, Vi seems to have not renewed its 1800 MHz spectrum in Rajasthan and bid for less spectrum in Delhi circle. This renewal of existing spectrum would have cost Vi ₹7,000 crore. Airtel seems to have renewed less spectrum in 1800 MHz in 4 circles (Mumbai, Gujarat, Maharashtra and Haryana with an eye on 5G,” said analysts at Axis Capital.

5G deployment

The interest in 2,300 MHz spectrum can be attributed to increasing popularity of the band for 5G deployment due its better coverage. While used to increase 4G capacity, it can also play a role in 5G deployment.

Analysts at Goldman Sachs said that Jio has likely spent the most amount in the auction, at around ₹50,000 crore, followed by Bharti Airtel at Rs 25,000 crore and Vodafone Idea around ₹3,000 crore “We believe Jio may have largely closed its gap with Bharti and Vodafone Idea on total spectrum, but Bharti may likely have participated aggressively in sub-GHz spectrum bands, maintaining its lead vs. Jio. However, we note that data carried on Jio’s network is almost 2x that on Bharti’s network , and thus adjusted for that, Bharti’s spectrum holding remains materially higher vs. that of Jio,” Goldman Sachs said in a research report.

800 MHz saw demand in 19 out of 22 circles. 49 per cent of bids received were in this band, thus showing significant demand for this spectrum in this auction. 900 MHz had demand in nine out of 19 circles: This compares to one circle of Tamil Nadu where existing spectrum was expiring, implying that operators are looking to increase their indoor coverage in additional circles.

1800 MHz saw demand in 21 out of 22 circles, with Odisha and Rajasthan witnessing no action so far. 2100 MHz had demand in three out of 19 circles: With sufficient spectrum available with operators in this band, there was limited activity here.

2300 MHz saw aggregate demand in all circles, even though both Airtel and Jio hold sufficient spectrum in this band.

Published on March 02, 2021

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