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5G auction-Day 2, An update

A total of nine rounds of bidding were completed in the 5G spectrum auctions that started on Tuesday, with demand yet to outstrip supply of airwaves in most circles.

The bid amount exceeded Rs 1.49 lakh crore on the second day of bidding, according to a tweet by PTI, which quoted Telecom Minister Ashwini Vaishnaw.

At the end of the second day, excess demand was witnessed in Uttar Pradesh-East circle in the 1,800 MHz band. There was demand for 75 blocks of 1,800 MHz in UP-East circle, an excess demand of 21 blocks. Bidding will resume for the circle on Thursday.

Bids have been placed at the reserve price in the 26 GHz, 3,300 MHz and 700 MHz bands, and sporadic demand was seen in 900 MHz bands in some circles, according to data released by the Department of Telecommunications.

Demand was also seen in the mid-band of 1,800 MHz, 2,100 MHz, and 2,500 MHz bands. No demand was witnessed in the 600 MHz and 800 MHz band.

The DoT does not disclose bid details of individual operators until the auction is complete. Actual demand and strategy of individual bidders will determine the duration of the auction. Industry analysts expected spectrum to be sold near the reserve price, and the bidding to last about two days, but it has now been extended to the third day.

Reliance Jio Infocomm Ltd., Bharti Airtel Ltd., Vodafone Idea Ltd. and Adani Data Ltd., a unit of billionaire Gautam Adani-controlled group, are participating in the auctions with 72 GHz of radiowaves worth Rs 4.3 lakh crore on offer.

The price for the spectrum has been lowered across bands with 600/700/800/900 MHz frequencies being similarly priced. Pricing in the mid-bands of 1,800 MHz and 2,100 MHz is also similar.

The government has offered easier payment terms—20 equal instalments instead of 30-50% upfront payment and an attractive interest rate of 7.2% on deferred payments—which is expected to generate demand from telecom operators.

According to Credit Suisse, based on the day one data, Jio has likely spent the most amount in the auction at around $11 billion, followed by Bharti Airtel at $6 billion, and Vodafone Idea at around $2.4 billion.

Both Bharti and Jio have likely built a pan-India spectrum footprint for 5G, with Vodafone Idea’s participation likely to be more selective, the brokerage said.

The bidding process has surprised most brokerages as many expected companies to act in a disciplined manner, but the intensity of the bidding has been seen as a negative as this will put pressure on their balance sheet.

According to Credit Suisse, Bharti Airtel and Jio bolstering their spectrum footprint may further boost their market shares relative to Vodafone Idea.

Mukesh Ambani’s Reliance Jio has deposited Rs 14,000 crore in earnest money, while its rival the Adani Group made a modest Rs 100-crore deposit recently. Sunil Mittal-led Bharti Airtel had put in Rs 5,500 crore, while for Vodafone Idea the amount stands at Rs 2,200 crore.

EMD of all the four applicants seeking 5G radiowaves adds up to Rs 21,800 crore, higher than the Rs 13,475 crore deposited in the 2021 auction when three players were in the race.

Earlier, the Department of Telecom allowed allocation of backhaul spectrum to winners of the 5G auction on an administrative basis. The telecom companies will have to pay the price once the pricing for the E-band spectrum is arrived at by the regulator and DoT. Bloomberg

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