Adani Group to drive competition during 5G spectrum auction

The Adani Group’s decision to join the 5G spectrum auction will intensify competition in upcoming auctions as well as the enterprise 5G space.
Adani GroupBillionaire Gautam Adani’s group on Saturday confirmed it is in the race to acquire 5G spectrum. Adani Group aims to use the 5G spectrum to create a private network to support its businesses from airports to power as well as data centers, PTI reports.

“As India prepares to roll out next generation 5G services though this auction, we are one of the many applicants participating in the open bidding process,” Adani Group said. The aim of the Adani Group is not in the consumer 5G business by setting up small cells across the country. It does not want to directly compete with Reliance Jio, Bharti Airtel and Vodafone Idea in the consumer 5G business.

BofA Securities in a note on the Adani Group’s plans to bid in 5G auctions said: “We consider this news flow negative for incumbent telecoms as it increases competition in upcoming auction bidding as well as in the long-term opportunity to target the enterprise space.”

CLSA wondered why would Adani bid in auction versus awaiting a direct spectrum assignment. “The question is why would Adanis bid in auction versus awaiting a direct spectrum assignment? Adani’s entry will create uncertainty over spectrum pricing in the 5G auctions which was expected to see bidding competition primarily between Bharti Airtel and Jio.”

Goldman Sachs observed that while the group has said it does not intend to be in the consumer mobility space. “If the Adani Group does end up buying spectrum in the upcoming auction, it could potentially increase competition in enterprise 5G, in addition to opening the doors for the Adani Group to expand into consumer mobile services over time.”

Globally, 5G services have been launched in three bands — 700MHz (coverage), 3.5GHz (5G coverage and capacity) and 26GHz (capacity and low latency).

“With Adani group ruling out offering consumer mobility services, its participation in 5G spectrum auctions will be limited to 3.5 GHz and 26 GHz bands for provision of private enterprise 5G network services,” said Credit Suisse.

The group’s foray to provide standalone 5G enterprise network solutions was a tad unclear given that globally, 5G enterprise use cases are still under pilot stages.

The 5G enterprise market size was valued at $1,682 million in 2020, and is projected to reach $16,846 million by 2028, growing at a CAGR of 33.9 percent from 2021 to 2028.

Credit Suisse also questioned the rationale behind bidding for 5G spectrum in auctions when the Centre has already allowed private enterprises to set up captive non-public network by acquiring spectrum from the government for nominal cost and without any license fees.

“Whereas, acquiring a 100 MHz block on pan-India basis in 3.5 GHz band is likely to cost Rs 317 billion (Rs 31,700 crore) and 500 MHz in 26 GHz band is likely to cost another Rs 35 billion (Rs 3,500 crore). Of course, these come with comfortable payment terms,” it wrote.

Credit Suisse felt that the possibility of Adani Group foraying into consumer mobility in the future is “non-zero”.

“While the Adani group has denied intentions of entering the consumer mobility business, market participants may still view this as a low, distant possibility given the sector’s history. However, it would require a meaningfully higher capital commitment…” said the report.

India aims to sell a total of 72,097.85 MHz of spectrum worth at least Rs 4.3 lakh crore during the spectrum auction that will commence on July 26, 2022.

India will conduct the spectrum auction in various low (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz), mid (3300 MHz) and high (26 GHz) frequency bands.