Jio, Airtel, Vi’s EMDs suggest telcos to give 700 Mhz spectrum a miss

Earnest money deposits (EMDs) put in by Reliance Jio, and (Vi) show that operators are likely to once again give expensive 700 Mhz spectrum a miss in the upcoming auction, starting March 1, analysts said.

“Operators can buy spectrum worth 5-to-7x of the EMD, and the deposits, which help understand maximum spectrum payout show they are unlikely to bid for the 700 Mhz spectrum band,”

said in a note.

The EMD size is indicative of a telco’s bidding strategy as it gives an operator eligibility points, based on which it can target a certain quantum of airwaves.

The upcoming auction for nearly 2300 units of airwaves across seven 4G bands – from 700 Mhz to 2500 Mhz – are valued at Rs 3.92 lakh-crore at base price. But analysts expect the government to garner under Rs 50,000 crore from the sale as the most expensive 700 Mhz band is likely to stay unsold once again as in 2016.

According to ICICI Securities, Jio, Airtel and Vi’s respective EMDs of Rs 10,000 crore, Rs 3,000 crore and Rs 475 crore caps their potential spectrum payouts at Rs 70,000 crore, Rs 21,000 crore and Rs 3,300 crore respectively in the upcoming sale.

The brokerage, though, said Bharti’s Rs 3,000 crore EMD is higher than expectations, while loss-making Vi’s modest sum is in line.

ICICI Securities expects Airtel to buy sub-Ghz spectrum in the 900 Mhz band only in Tamil Nadu and Madhya Pradesh in the March sale, and fill gaps in the six circles in this sub-Ghz band in future auctions. It also expects the telco to buy 1800 Mhz spectrum to complete at least 5 carriers in each circle and beef up airwave holdings in the 2300 Mhz band, which would help it make a smooth transition to 5G using dynamic spectrum-sharing technology.

Airtel recently demonstrated live 5G services on its 4G network using the 1800 MHz band and said it could commercially launch 5G with existing 4G airwaves in a few months.

The brokerage expects Vi to renew 5 units of spectrum in its expiring 900 Mhz band in Tamil Nadu and also potentially target 5 units in the 1800 Mhz band each in Andhra Pradesh and UP-East.

Analysts said Jio’s significantly higher EMD compared to its incumbent rivals underlines its need to renew expiring airwaves in the 800 MHz band that it owns and those of Reliance Communications that it uses. It is likely to be the most aggressive buyer as it needs to both renew expiring airwaves and add airwaves to cater to a rising user base consuming more data. Lookmygadget