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Auction-Day 1, An Analysis, ICICI Securities

Spectrum auction day-1 concluded on a negative note. Operators picked spectrum worth Rs1,450bn (US$18bn), which reflects a modicum of investment indiscipline. We were of the opinion that operators’ priority would be to drive RoIC and cashflows higher, but spectrum auctions have never been easy. Though details of the bids are not announced as yet, our analysis shows that RJio has likely bid for highest spectrum worth Rs801bn, and likely opted for 10MHz spectrum in 700MHz band. Bharti Airtel may have bid for spectrum worth Rs450bn and spent 20% more than our base case. The extra spend is probably for 1800MHz and 2100MHz bands. VIL has likely bid for Rs184bn for spectrum, which is within our estimated range. Adani Data Networks (Adani) should have picked 26GHz spectrum pan-India, our analysis suggests.


  • Spectrum auction day-1 concludes. Spectrum auction began 26th July’22 and ended day-1 after four rounds. The auction will resume in morning with a fifth round, and we expect it to complete by end-of-today. On closure of round-4, telcos have cumulatively bid for spectrum worth Rs1,450bn (US$18bn), and a significant portion of spectrum bought in this auction will likely go in deploying 5G services. The bids received have been for spectrum across 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2500MHz, 3300MHz and 26GHz bands. Our base case assumption was 700MHz band will remain unsold in this auction, hence operator(s) bidding for 700MHz at such high prices is drag for the industry as it structurally reduces RoIC.
  • Bharti may have bid for spectrum worth Rs450bn. Our analysis shows: 1) Bharti is likely to have bought 13MHz spectrum in 900MHz band in C’ circles, where it had spectrum gap, for Rs3.6bn; 2) it has bid for 1800MHz band spectrum in nine circles for total 44MHz quantity, worth Rs47bn; 3) it has picked 30MHz spectrum in 2100MHz band in six circles for Rs27bn; 4) it has purchased 2200MHz quantity in 3300MHz band (100MHz per circle) for Rs317bn; and 5) 17600MHz quantity in 26GHz band (800MHz spectrum per circle) for Rs56bn. Our base case estimate was a spend of Rs380bn in the auction, and we did not factor any need in 1800MHz and 2100MHz bands (as Bharti already has enough quantity in these segments). Therefore, the spend is 20% higher than our base case.
  • RJio may have spent Rs801bn for spectrum purchase, according to our analysis. This is more than 2x our base case estimate. Our analysis indicates that the higher spend is largely for buying 700MHz spectrum band where it has probably picked 10MHz pan-India for Rs393bn. It may have also bought: 1) 2200MHz quantity in 3300MHz band (100MHz per circle) for Rs317bn; 2) 17600MHz quantity in 26GHz band (800MHz spectrum per circle) for Rs56bn; 3) 20MHz (four circles) in 800MHz band for Rs10.6bn; and 4) 20MHz (four circles) in 1800MHz band for Rs25bn.
  • VIL should have spent Rs184bn for spectrum. As expected, VIL seems to have purchased 50MHz spectrum in 3300MHz band in 17 circles for Rs152bn; and 400MHz spectrum in 26GHz band in 16 circles for Rs26bn. It appears to have added 10MHz spectrum each in Andhra Pradesh and Punjab in 2500MHz band for Rs6.5bn. VIL’s total spend is within our base case assumption.
  • Adani likely bought spectrum worth Rs9bn. It appears Adani has bought 26GHz spectrum in 20 circles (except in Delhi and Kolkata), and its total spectrum purchase could be 3350MHz for Rs9bn. Our estimate is provisional data does not reflect the entire purchase by Adani. We believe it should have purchased 200MHz spectrum in all circles except Gujarat where it would have bought 400MHz.
  • Can higher spectrum spend led to more price hikes? Spectrum spend by market leaders RJio / Bharti is significantly higher than expected, and this would require the industry to grow faster in order to justify such large investments. This has not been true in most geographies across the globe, and higher spectrum investment has been seen to depress RoIC for the industry. Therefore, we would remain cautious on the higher investments in India telecom.

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CT Bureau

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