"The spectrum auction will begin on 1st Mar'21. Given the consolidation in the sector over the last decade, we hope telcos will say goodbye to the old irrational and desperate price bidding to acquire the limited available spectrum," Motilal Oswal Financial Services has stated in a report.
The firm expects low competition intensity as there is sufficient spectrum, and different band usage and priorities of each player.
"RJio/Bharti/VIL need to spend INR280b/INR129b/INR83b at the reserve price to renew their existing spectrum. However, the Earnest Money Deposit (EMD) indicates that Bharti, RJio may be interested in spending 2-3x the renewal requirement in other bands. VIL has limited options given its liquidity position," Motilal Oswal Financial Services has stated.
"The sub-GHz band will be of high interest to Bharti and RJio. But unlike previous times, both companies may choose separate bands (900MHz/800MHz), and hence, should not be a cause for concern. The two bands of 1,800-2,300MHz may see some clashes, but given the sufficient amount of spectrum available, we expect limited competition.
With a FCF of over INR215b (excluding spectrum renewal charges) in FY22E, Bharti should be comfortably placed. However, its net debt would increase to INR850-900b. RJio has sufficient liquidity from the recent stake sale, with a FCF of INR143b in FY22E," the report adds.
Expect lower competitive intensity
According to Motilal Oswal, the auction may see lower competitive intensity given the varied priorities of each player.
"VIL's weak liquidity position may keep its interest low. Bharti's sub-GHz spectrum interest may largely be limited to 900MHz, while RJio's renewal of 800MHz spectrum may not see much interest from rest of the players. The 1,800MHz and 2,300MHz spectrum may be of high interest to both Bharti and RJio, which may eye it for their 4G plans and for their 5G requirements going forward," the report has stated.