India fetches $10.6 bn during 2021 spectrum auction as 5G gains focus

India government has concluded the 2021 spectrum auction on Tuesday fetching Rs 77,814 crore or $10.61 billion from telecom operators.
Airtel, Jio, Vi mobile network
Bharti Airtel and Reliance Jio have revealed that both will use the fresh spectrum to launch their 5G services in India — depending on market conditions.

Reliance Jio, a telecom operator promoted by Mukesh Ambani, has spent Rs 57,123 crore or $7.79 billion during the spectrum auction.

ALSO READ: Reliance Jio buys spectrum

Bharti Airtel, a telecom operator promoted by Sunil Mittal, will be spending Rs 18,699 crore or $2.55 billion for buying spectrum.

ALSO READ: Airtel acquires spectrum

Vodafone Idea (Vi) will be spending Rs 1,992 crore or $271.5 million for buying spectrum in five telecom circles. The cash strapped telecom operator did not reveal additional details on the spectrum auction.

ALSO READ: Vi buys spectrum

The spectrum auction has allowed operators to garner additional 4G spectrum, which will in turn help them improve network quality and ultimately benefit the customers. The impact on EBITA margins for operators should not be as significant as well, says Mohit Prabhakar, managing director of Protiviti Member Firm for India.

India has offered a total of 2,251.25 MHz units spread across different bands to support the growth of mobile operators. The spectrum will be valid for a period of 20 years and will come at a total valuation of Rs. 3.9 lakh crore (at reserve price).

The government had recently slashed the revenue estimates from other communications services by 74.6 percent to Rs 33,737 crore for FY21 from Rs 1,33,027 crore earlier. The reason for the reduction in revenues is delay in 5G spectrum auctions and lower revenues from Adjusted Gross Revenue (AGR) payments.

Staggered payments announced by the government with respect to AGR on 1 September 2020 gave an extension to the telecom industry as it allowed the telecoms to make payments over 10 years period starting 1 April 2021. The telecoms however were asked to pay 10 percent of their AGR dues by 31 March 2021.

The spectrum auctions in March 2021 will add to the revenues of the government either in FY21 or FY22 depending on the time span of the auction as successful bidders can pay entire bid amount in one go (upfront) or may exercise an option to pay a certain amount (25 percent for spectrum won in 700 MHz, 800 MHz, 900 MHz bands or 50 percent for spectrum won in 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz bands) upfront and remaining amount in a maximum up to 16 equated annual instalments, after a moratorium of two years.

In addition to this, expected 5G auctions in FY22 may provide support to the estimated 60 percent rise in government receipts to Rs 53,987 crore from communication services during the year, says CARE Ratings.

Telecom operators did not opt for 700 MHz spectrum band due to high price though it can be used for launching 5G services.

India may keep 3300-3400 MHz and 3400-3600 MHz spectrum bands for 5G network during the next round of spectrum auction.