Telecom Companies Kick Off Spectrum Auction with Rs 11,000 Cr Bids

The auction of radio waves for mobile services began on Tuesday, with five rounds of bidding attracting offers worth approximately Rs 11,000 crore from telecom companies. The government has put over 10,500 MHz spectrum in eight frequency bands up for auction, valued at Rs 96,238 crore at base price. These bands include 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 2,500 MHz, 3,300 MHz and 26 GHz.

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Initial Bidding Activity

Telecom operators showed interest in four spectrum bands initially -- 900 MHz, 1800 MHz, 2100 MHz, and 2500 MHz. The auction entered the fourth round around 3 pm. According to sources, the first day saw bids mainly in the 900 and 1800 MHz bands. Operators also placed bids for the 2100 MHz band spectrum in three circles.

Bharti Airtel has spectrum expiring in six circles and Vodafone Idea (VIL) in two circles. A JP Morgan report indicates that VIL needs to decongest its existing network over the next few quarters using the 900, 1800 and 2100 MHz spectrum bands. Bharti Airtel and VIL are focusing on replenishing their spectrum holdings.

Expert Analysis and Predictions

Telecom expert Parag Kar estimates that the 1800 MHz band drew bids worth Rs 6,306.4 crore, while the 900 MHz band attracted bids worth Rs 4,465 crore. The 2100 MHz band saw bids worth Rs 360 crore on Day 1. There were no bids placed in the remaining five spectrum bands.

Analysts had predicted a relatively muted auction this year with low earnest money deposit (EMD) submissions by telcos. The EMD submitted ranged between Rs 300-3000 crore - the lowest since the auctions in 2014 and down by about 80 per cent compared to the previous auction in 2022.

Telecom Operators' Strategies

Reliance Jio has deposited the highest earnest money of Rs 3,000 crore for the spectrum auction. This gives Jio significant bidding power among the three telcos. Bharti Airtel has submitted an EMD of Rs 1,050 crore and Vodafone Idea VIL of Rs 300 crore.

Industry analysts expect Bharti Airtel to bid for some of its expiring spectrum as it has renewals for 42 MHz of spectrum in the 1800 MHz and 900 MHz bands in six circles. Jio may be more selective due to its adequate spectrum across both the 4G and 5G bands.

Impact on Telecom Industry

Telecom industry body Cellular Operators Association of India (COAI) Director General SP Kochhar stated that the auctions will catalyse the rapid rollout of 5G services across India. "By bridging the digital divide, the auctions will ensure that even remote areas gain access to high-speed internet," he said.

Kochhar added that these auctions symbolise a commitment to a prosperous and digitally empowered India. "We are confident that the outcomes will lay a strong foundation for a digitally advanced nation," he said.

Previous Auction Comparisons

During the last auction in 2022, which lasted seven days, over Rs 1.5 lakh crore worth of telecom spectrum was sold. Mukesh Ambani's Jio emerged as the top bidder then, securing nearly half of all airwaves worth Rs 88,078 crore. Sunil Mittal's Bharti Airtel made a successful bid of Rs 43,084 crore while Vodafone Idea bought spectrum for Rs 18,799 crore.

Parag Kar's analysis suggests that Jio may focus on bidding for only the 800 MHz band this time around. This could lead to an estimated cash flow of Rs 18,000 crore for Jio. Bharti's approach aims at consolidating and enhancing its spectrum efficiency with an expected outflow of Rs 11,512 crore at reserve price.

The operator-wise break-up of bids was not immediately known and will be announced once the auction concludes. The auction is set to resume on Wednesday with the sixth round of bidding.

The ongoing auction highlights a strategic approach by telecom operators focusing on renewing essential spectrums while being selective about new acquisitions. This cautious strategy reflects market conditions and financial prudence amidst evolving telecom needs in India.