The spectrum auctions which the government plans to hold in March are likely to see operators bidding conservatively, which means that apart from renewing what is expiring, they will just fill the gaps in their portfolio to leverage their existing spectrum holding to the maximum. Also, none of the operators are expected to bid for the premium 4G spectrum in the 700 Mhz band because of the high reserve price.
This means that for the second time — the first time this band was put up for auction was in 2016 — there would be no takers for this band due to prohibitively high price.
Reliance Jio needs to renew the biggest chunk of its spectrum — its 81.25 Mhz in 800 Mhz band which is used for providing 4G services, is expiring later this year. So it is sure to bid for enough spectrum in this band as it needs to have 10 MHz in every circle.
In addition, it is likely to buy additional spectrum in 1800 MHz and 2300 MHz band in order to build a portfolio of 10 MHz and 40 MHz, respectively. With this strategy, Jio will end up expanding its 4G spectrum from the existing 23.4 MHz to 40.82 MHz — a 74.4% increase.
The company’s total outflow is likely to be Rs 57,790 crore at the reserve price. Since operators are required to pay only 25% upfront and can pay the remaining amount over a 16-year period after a two-year moratorium, its immediate outflow will be approximately Rs 14,400 crore.
In the case of Bharti Airtel, a total of 57.60 Mhz is expiring later this year, of which bulk 51.40 Mhz is in 1800 Mhz and 6.20 Mhz is in 900 Mhz band.
The company is likely to go for spectrum in the 900 MHz to complete a block of 5/10 MHz in every circle. Also, it is likely to try to take additional spectrum in 1800 (to complete 15 MHz), 2100 (to complete 10 MHz), and 2300 MHz band (to complete 40 MHz).
With this bidding strategy, Bharti will end up expanding its 4G spectrum from the existing 31.6 MHz to 44.9 MHz — a 42% increase. Its total outflow is likely to be Rs 34,023 crore at the reserve price and if its pays 25% of the amount upfront, its immediate outflow will be approximately Rs 8,500 crore.
For Vodafone Idea, a total 51.05 Mhz spectrum is expiring, of which again bulk of 51.05 Mhz is in 1800 Mhz while 6.20 Mhz falls in 900 Mhz band.
It is likely to opt for spectrum in the 900 MHz to complete a block of 5 MHz in every circle. Also, it may try to take additional spectrum in 1800 (to complete 10 MHz), 2100 (to complete 10 MHz), and 2500 MHz band (to complete 20 MHz).
If it adopts this strategy, Vodafone Idea will end up expanding its 4G spectrum from the existing 39.1 MHz to 45.4 MHz — a 16.11% increase. Its total outflow is thus likely to be Rs 17,908 crore at the reserve price. At 25% upfront payment, its immediate outflow is likely to be approximately Rs 4,700 crore.
As reported by FE earlier, of the total 2,251 MHz of spectrum worth Rs 3.92 lakh crore at reserve price in the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands; which would be put up for auctions, the government can mop up a total of around Rs 1.09 lakh crore, assuming there’s no participation for 700 Mhz band. This would be around 28% of the total value. This means that around 60% of spectrum will remain unsold. The Financial Express