Spectrum Auction: Telecom Companies To Show Muted Participation, Airtel To Lead Spends

Telecom operators Bharti Airtel Ltd., Reliance Jio Infocomm Ltd., and Vodafone Idea Ltd. have submitted applications to the government for the spectrum auction, but analysts expect the reserve price to be the selling price for the spectrum as demand is likely to be subdued.

Operators will bid for renewal spectrum and boost capacity in certain bands/circles, resulting in demand mainly for spectrum in the 800/900/1800/2300 MHz bands, according to a note by Jefferies.

The Department of Telecom had invited applications for the auction of spectrum in the 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 2,500 MHz, 3,300 MHz, and 26 GHz bands. The total value of these is pegged at Rs 96,317.65 crore.

The last date for the submission of bids was May 6.

The spectrum will be assigned for 20 years, and successful bidders will be allowed to make payments in 20 equal annual instalments. After a minimum of 10 years, the telecom companies will also have the option to surrender the spectrum they acquired through the upcoming auction.

Bharti Airtel has renewals for 42 MHz of spectrum in the 1,800 MHz and 900 MHz bands in six circles, Jefferies noted. "At the reserve price, this would result in spending of Rs 3,800 crore."

However, it may also bid in certain circles to increase its holding in the 800MHz/1,800MHz bands to 10-15MHz and in the 2,300MHz band to 40MHz, leading to a maximum spend of Rs 12,300 crore, it said.

Reliance Jio may have limited bids considering its hefty investment in the past two auctions, including the 5G spectrum. The Mukesh Ambani-owned telecom company has a portfolio of spectrum in the sub-GHz band, aggregating 5x20MHz spectrum in the 700MHz and 800MHz bands.

It is also a leader in the low-band spectrum that is considered for propagation and coverage. Jio is the leader here, with 50% of the total holding, according to Axis Capital.

Airtel is the second largest at 20%, though even Vodafone Idea isn’t too far behind at 16%, as it aggressively bid to win back its original spectrum holding in these bands during the 2014 and 2015 spectrum auctions.

"We believe Reliance Jio’s peak investment cycle to be behind, and FY25E onwards focus will likely shift to monetising investment and turning free cash flows positive," according to ICIC Securities.

However, the company may increase its spectrum holding in certain circles in the 800 MHz band, which could lead to expenditures of nearly Rs 3,700 crore, Jefferies said.