4G spectrum auction concludes

The spectrum auction for 855.60 MHz held for two days concluded on March 2, 2021 at 12:45 pm, after a total of 6 rounds of bidding. The e-auction was based on Simultaneous Multiple Round Ascending Auction (SMRA) methodology. Four rounds of bidding (two each with stipulated activity levels of 80 % and 90%) took place on March 1. Two rounds of bidding with stipulated activity level of 100 percent took place on March 2.

Three bidders, Reliance Jio, Bharti Airtel and Voda Idea bids totalled to Rs 77814.80 crore. The auction proceeds were well below the Rs 3.92 lakh-crore of spectrum across seven bands put on sale.

Quantity acquired was:

800 MHz band: 150 MHz (Total quantity put to auction: 230 MHz)

900 MHZ band: 38.40 MHz  (Total quantity put to auction: 98.80 MHz)

1800 MHZ band: 152.20 MHz (Total quantity put to auction: 355 MHz)

2100 MHz band: 15 MHz (Total quantity put to auction: 175 MHz)

2300 MHz band: 500 MHz (Total quantity put to auction: 560 MHz)

A total of 2308.80 MHz was put up for auction, including spectrum that is expiring up to December, 2021. No bids were placed for 700 MHz and 2500 MHz bands. Excluding spectrum in 700MHz and 2500MHz bands, this is about 60 percent of the spectrum put to auction.

In the 2016 spectrum auction, where there were 7 bidders, the spectrum sold was 41 percent by quantity and 12 percent by value of the total spectrum put to auction. The corresponding figures in the 2021 spectrum auction are 37 percent and 19 percent respectively, with 3 participants.

Reliance Jio bid for 488.35 MHz, at an amount of Rs 57122.65 crore.

Bharti Airtel bid for 355.45 MHz, at an amount of Rs 18698.75 crore.

Voda Idea bid for 11.80 MHz, at an amount of Rs 1993.40 crore

Spectrum Usage Charges (SUC) for the spectrum acquired in this auction will be payable at the rate of 3% of Adjusted Gross Revenue (AGR) of the licensee, excluding revenue from wireline services.

The auction is concluded and these provisional results are subject to scrutiny and approval by the Government.

No bids for 700 MHz
The 700 Mhz band, worth nearly Rs 2 lakh-crore were not bid for once again due to its high base price, despite a 43% cut from 2016, when it had also found no takers. All three carriers gave it the miss, blaming the high starting price and called on the government to cut prices and put it up for sale again. “The fact that in 700 MHz no bid has come is something we will see. But there is also a distinct possibility that now with 5G technology that’s going to come sooner or later. In 700 MHz, the 5G ecosystem is also developing as it is developing in the mid band 3.3-3.6 GHz. If 700 MHz is not sold in this auction, nothing prevents it from being sold in the next auction,” said Anshu Prakash when the 4G spectrum auction concluded.

SOME COMMENTS
“The value of the spectrum for which there are winning bids is Rs 77,814.80 crore. Hence, incremental bids for Rs 668.20 crore were made today.

The operators have consolidated their positions in the bands in which they were operating and taken spectrum in particular bands where they felt they had less spectrum.”

If they already have radios in 800 and 900 MHz, then they may not be immediately interested in also bidding for 700 MHz which is more expensive. Spectrum is not meant to be hoarded as it is an expensive resource. They (operators) have to pay spectrum auction instalment, and even on SUC, if you’re not using a particular spectrum band there is a presumptive charge. So, bidders have to be very careful how they are going to buy.

Given the COVID scenario and other stress situations which the sector might be facing we had anticipated, that spectrum which will be sold will be about Rs 45,000-50,000 crores. So, what has actually happened is that it has far exceeded our expectations. And we are very happy that the industry is sanguine and confident. And it has bid to acquire more.

The 2021 auctions are in line with previous ones. In 2016, only 12% of what was on offer was sold, in 2013 it was only 7%, in 2012, it was only 19% and 2010, it was only 60%.”
Anshu Prakash, Secretary, Department of Telecommunications, Ministry of Communications

“At the outset, we would like to thank the government for making abundant spectrum available for auctions. Airtel now has a solid spectrum portfolio that will enable it to continue delivering the best mobile broadband experience in India. We are most excited at bringing the power of Airtel services to an additional 90 million customers in India through the power of our pan India Sub GHz footprint.”
Gopal Vittal, MD and CEO of Airtel.

“We have used this opportunity to optimise spectrum holding post-merger (of Vodafone India Ltd and Idea Cellular Ltd in August 2018) to create further efficiencies in few circles… The spectrum we have acquired in 5 circles will help us enhance our 4G coverage and capacity, enabling superior digital experience for our customers.”
A Vodafone Idea company release.

“Jio has revolutionised the digital landscape of India with the country becoming the fastest adopter of Digital Life. We want to ensure that we keep on enhancing experiences, not only for our existing customers, but also for the next 300 million users that will move to digital services. With our increased spectrum footprint, we are ready to further expand the digital footprint in India as well as get ourselves ready for the imminent 5G rollout.”
Mukesh D Ambani, Chairman, Reliance Industries.

“The telcos not only bid for renewals of the expiring spectrum but also focussed on consolidating their spectrum holdings in the 800 MHz, 900 MHz and 2,300 MHz bands. While the sub-GHz bands will be crucial for 5G technology deployment going forward as well as improvement of indoor coverage, the appetite for the 2,300 MHz band stems from the rising mobile broadband usage and thus the need for improving network capacity.

While the value of total spectrum sold is only 19 per cent of the total value of spectrum on offer, post the auctions, the debt levels of the industry would increase further to around ₹5-lakh crore as on March 31, 2022, and despite the improvement in the operating metrics, the debt protection metrics will continue to remain weak.”
Ankit Jain, Assistant Vice President, ICRA

“While the spectrum bought by the operators can give them a start into 5G, access to the 700 MHz band will be crucial because 5G needs adequate spectrum. So the government will have to rethink about the reserve price.”
Prashant Singhal, Emerging Markets Leader of Technology, Media & Entertainment and Telecommunications, EY.

Reliance Jio emerges the highest bidder
This, is not surprising as Jio is the only telco facing a must-buy situation. Airwaves in the 800 MHz band that it owns and also uses as part of a sharing pact with Reliance Communications are expiring in 18 circles in July.

Reliance Jio Infocomm Ltd. announced that it has successfully acquired the right to use spectrum in all 22 circles across India in the recently concluded spectrum auctions conducted by Department of Telecommunications, Government of India.

Circle wise details of spectrum acquired are:

RJIL has very well balanced spectrum for LTE Services and future upgradation to 5G Technology

• Through this acquisition, RJIL’s total owned spectrum footprint has increased significantly, by 55%, to 1,717 MHz (uplink+ downlink).
• RJIL has the highest amount of sub-GHz spectrum with 2X10 MHz contiguous spectrum in most circles. It also has at least 2X10 MHz in 1800 MHz band and 40 MHz in 2300 MHz band in each of the 22 circles.
• RJIL has achieved complete spectrum derisking, with average life of owned spectrum of 15.5 years.
• RJIL’s spectrum has been acquired in the most cost efficient manner with an effective cost of Rs 60.8 crore per MHz.
• With the enhanced spectrum footprint, especially contiguous spectrum, and pan-India infrastructure deployed, RJIL has enhanced network capacity to service its existing users as well as hundreds of millions of more subscribers on its network.
• The acquired spectrum can be utilised for transition to 5G services at the appropriate time, where Jio has developed its own 5G stack.

Cost
The payment to be made for the right to use this technology agnostic spectrum for a period of 20 years is Rs. 57,123 crore, as per the details below:

(amount in Rs. crores)

As per terms of the spectrum auction, the deferred payments have to be made over a period of 18 years (2 year moratorium plus 16 year repayment period), with interest computed at 7.3% per annum.
CT Bureau