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EMD indicates aggressive bids from Jio and Airtel

The earnest money deposited by the four bidders for the 5G spectrum indicates that Reliance Jio is expected to bid the most aggressively.

Sources told BusinessLine that both Reliance Jio and Bharti Airtel are expected to cross ₹5,000 crore in earnest money deposits (EMD), while Vodafone Idea will deposit an EMD of around ₹1,000 crore. Adani, which has been issued a letter of intent by the Department of Telecommunications for grant of Unified Licence for the Gujarat Circle, has likely put a token deposit below ₹250 crore to buy minimal spectrum to set up private networks.

An earnest money deposit is an assurance of payment in good faith made by operators to the government to assure purchase of high-ticket items such as the 5G spectrum. If the EMD is higher, the operator has the flexibility to put larger bids for larger quantities of spectrum. The quantum of EMD committed by the operator allows market watchers to get a rough idea about how the spectrum bidding strategy for each operator is likely to play out, and what bands and the quantum of spectrum each operator is interested in.

A top industry source told BusinessLine: “The clear aim for Reliance in these auctions is to establish that is not just to maintain leadership, but also to deprive its competition of prime spectrum, thus eliminate competition.”

Reliance has provided the DoT with an earnest money deposit between ₹5,000 core and ₹7,000 crore. The clear aim for Reliance here is to bid aggressively in existing spectrum bands, where it is leading the market, namely 800MHz and 1,800MHz. Reliance is also likely to bid most aggressively in the new 5G band 3500MHz to get the cleanest possible spectrum there. This will allow Jio to buy spectrum worth approximately ₹60,000 crore in the upcoming auctions.

Bharti Airtel is also expected to have placed an EMD over ₹5,000 crore as per the executive, aiming at an outflow of ₹55,000 crore of spectrum in the upcoming auctions.

Vodafone Idea, which is desperately seeking funds to foot the 5G Capex has likely made an EMD of only approximately ₹1,000 crore.

This leaves the elephant in the room, the Adani Group. For now, Gautum Adani is veering away from the consumer mobility territory occupied by the three incumbents. The Adani Group will be participating in the auctions through their 100 per cent promoter-owned entity, Adani Data Networks Limited, a company with a net worth of ₹248.35 crore. Adani has also likely put an EMD below ₹250 crore, with a sole focus on mm-wave to set up private networks. Adani will also be focusing on certain LSAs, as part of the applicant ownership details, it was disclosed that the company has received a letter of intent from the DoT to grant a Unified License for the Gujarat Circle. The Hindu BusinessLine

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