Jio to spend more during spectrum auction beating Airtel and Vi

Reliance Jio is expected to spend more during the upcoming spectrum auction beating rivals Airtel and Vodafone Idea (Vi).
Airtel, Jio, Vi mobile networkReliance Jio Infocom, Bharti Airtel and Vodafone Idea (Vi) has submitted earnest money deposit (EMD) of Rs 10,000 crore, Rs 3,000 crore and Rs 475 crore, respectively, for participating during the upcoming spectrum auction, starting March 1.

The deposits are mandatory to participate in the spectrum auction. The quantum of EMD is indicative of an operator’s bidding strategy as it gives the eligibility points (EPs) based on which it can target a certain quantum of airwaves in specific telecom circles.

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

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

An EMD of Rs 10,000 crore would allow Reliance Jio to buy 4G spectrum worth Rs 45,000-66,000 crore, underlining the telco’s need to renew expiring airwaves and add spectrum.

India government is expected to generate less than Rs 50,000 crore from the spectrum auction as the most expensive 700MHz band may go unsold again.

A recent Credit Suisse report said most of the operators will be bidding for renewal of spectrum. Based on TRAI’s last reserve price, it expects the renewal of expiring spectrum to cost around Rs 15,000 crore for Airtel and Rs 11,500 crore for Jio.

Reserve price for 700MHz spectrum is 38 percent higher than 800MHz spectrum with prices in three metro circles being 56 percent higher compared to 800MHz spectrum.

“We expect telcos to give a miss to spectrum in the 700 band. We expect Jio to purchase additional spectrum (beyond expiring spectrum) as it will look to augment its network capacity having garnered 35 percent subscriber market share and a much higher share of traffic,” Credit Suisse said.

Airtel may not renew all the expiring spectrum given it has built up its spectrum holdings through M&A over the last three years, Credit Suisse said.

India government on December 17 approved the proposal for the auction of 2,251.25 MHz of spectrum worth Rs 3.92 lakh crore at the base price. The bids would take place for spectrum in frequency bands of 700 MHz, 800 MHz, 900 MHz, 2100 MHz, 2300 MHz and 2500 MHz.

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

Airtel has sub-GHz spectrum gap in 8 circles, of which, spectrum availability in 900 MHz is only in Tamil Nadu and Madhya Pradesh. Airtel may 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.

Airtel 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 Airtel in smooth transition to 5G in future using dynamic spectrum sharing. Higher EMD also means, Airtel will may beef-up spectrum quantity up to 40 MHz in many or its all circles.

Vi 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).