Airtel expected to lead bids in May auction- Jefferies, Morgan Stanley

Bharti Airtel (Airtel) is expected to lead on spectrum bids in the upcoming auctions in May as it has renewals for 42MHz of spectrum in 1800MHz and 900MHz band in six circles, which would result in the company spending of ₹3,800 crore at reserve prices, analysts said on Monday.

“Although Airtel has de-risked its operations by acquiring spectrum in 900/18000MHz bands in previous auctions, we still expect it to renew the bulk of its spectrum in these markets to protect/ increase its market share. It may also bid in certain circles to increase its holding in 800MHz/1800MHz bands to 10-15MHz and in 2300MHz band to 40MHz,” said Jefferies in a report.

This could lead to a maximum spend of ₹12,300 crore, it said adding that the absence of 700MHz band should allay concerns about overspending by Airtel in the current auctions.

According to the report, the companies would focus on renewals to limit spectrum demand: with operators owning 5G spectrum (3300MHz, 26GHz) that is largely underutilised, they are likely to focus on spectrum coming up for renewals in 2024 and selectively augmenting in 800/900/1800/2300MHz bands, the research firm said.

“We expect maximum spectrum demand of $2 billion, implying 17 per cent of the spectrum value being sold. This is much lower than the value of spectrum sold in any auction since 2014. We do not expect excess demand in any circle/band, implying that spectrum may be sold near reserve prices,” it said.

According to Morgan Stanley also, Airtel will be bidding to renew its 900Mhz and 1,800Mhz bands, which were set to expire in Feb-24, in six circles – UP (East), West Bengal, Bihar, Orissa, Assam, J&K – and were administratively located for three months until the auctions start.

However, its renewal in the 900MHz band is likely, especially in West Bengal circle. This could lower its spend from ₹1,500 crore for all renewals to ₹200 crore for just 900MHz band, it said.

“We project incremental spectrum liability of ₹5,100 crore in F2025 for Airtel. However, we do not rule out the possibility of bidding for other circles/bands given strategy around doubling down on rural roll outs and eventual amount being higher than what we have assumed,” it said.

According to Jefferies report, Vodafone Idea may not bid for renewals in 1800MHz band. It has renewals for 12MHz of spectrum in the 1800MHz and 900MHz band in two circles. At reserve prices, this would result in spending of ₹1,500 crore. Given that Vodafone Idea has ample spectrum in renewal circles in 1800MHz band, it may opt not to renew spectrum in the 1800MHz band.

According to the reports, the bigger catalysts for the industry will be potential tariff hikes post elections in July-September, which will be critical for expectations to come through.

The Department of Telecommunications (DoT) on Friday had announced that the upcoming telecom spectrum auction will start from May 20, for which it issued a notice inviting applications (NIA). Spectrum in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz, and 26 GHz bands will be put for auction at a total base price of ₹96,317.65 crore.

Spectrum which is held by certain companies undergoing insolvency processes as well as frequencies expiring this year, will also be put on auction, the DoT had added. The Hindu BusinessLine