India telecom network operators Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications may not bid for 700MHz spectrum during the 2016 spectrum auction.

The main reason is the high price for the 700MHz spectrum. There are other reasons as well, says Fitch Ratings.

The top four telecoms will not be willing to make investment in 700MHz due to their stretched balance sheets and need to preserve cash to challenge the entry of Reliance Jio, a part of Reliance Industries (RIL) in March-April 2016, said Fitch Ratings.

Fitch Ratings said the 700MHz spectrum auction planned in H2 2016 may not be attractive to telecoms, given limited device availability and that telecoms possess alternative spectrum in 850MHz, 1800MHz and 2300MHz to roll out 4G services.

Bharti Airtel owns about 40 percent of the private telecoms’ 900MHz, and will offer 4G services in 1800MHz and 2300MHz. Reliance Jio, after making an investment of about $15 billion on spectrum and networks, has access to the pan-India 800MHz and 850MHz spectrum.

The reserve price of $1.7 billion per MHz for pan-India 700MHz spectrum for deploying 4G services on 700MHz will be insufficient to offset the relatively high price.

The reserve price of 700MHz spectrum is about 2.0x, 3.4x and 4.0x of the recommended reserve price for 800MHz, 900MHz and 1800MHz spectrum, respectively.

In March 2015, the telecoms committed the largest-ever investment of $17.7 billion, mainly due to the necessity to retain their expiring spectrum to avoid network disruption. The auction saw aggressive bidding as spectrum offered was limited.

Fitch Ratings did not say anything about the possible interest from telecom businessman Mukesh Ambani for the costly 700 MHz spectrum.

Spectrum auction less attractive to telecoms?

Fitch Ratings says the 2016 spectrum auction may be less attractive to telecoms.

The BJP-ruled government’s decision to allow spectrum sharing and trading among telecoms could make bidding in spectrum auctions unattractive. It may be noted that Airtel Chairman Sunil Mittal earlier indicated that there will be six major telecoms in India after a series of consolidation.

Reliance Communications is in the process of grabbing MTS India and Aircel. Videocon India has agreed to sell its 4G spectrum to Idea Cellular.

Baburajan K
[email protected]