India spectrum auction: Who's bidding for what (and why)?

India is inching closer to the March mega spectrum auction. A total of 2310MHz spectrum in the frequency bands of 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz and 2300MHz will be on sale with top three telcos, Reliance Jio, Bharti Airtel and Vodafone Idea, being the active bidders.

All three telcos have deposited Earnest Money Deposit (EMD), which gives some indication of the quantum of the spectrum they are trying to acquire.

According to media reports, Jio has deposited EMD of INR90 bilion ($1240.8 million), Airtel and Vodafone Idea INR30 billion ($413.6 million) and INR5000 million ($68.9 million), respectively.

Figure 1: Under the hammer: India is gearing up for the spectrum mega-auction in March.
(Source: Bill Oxford on Unsplash)

While the notice inviting application (NIA) doesn't say so, a service provider can typically purchase spectrum worth six-to-seven times of the EMD.

The EMD also indicates the auction essentially pits Jio and Bharti Airtel against each other, with Vodafone Idea being the third and mostly inactive participant in the auction. Low EMD also means a good percentage of the spectrum is likely to remain unsold.

Going by the reserve price, the Indian government stands to gain approximately INR4000 billion ($55.7 billion) even if the spectrum sells at the base rate. However, EMD deposited is much less than what it should have been for the entire spectrum to be sold.

Here's a run-down of spectrum up for sale in the auctions:

A good quantity of 700MHz is up for grabs. Even so, it is likely to remain unsold because of the high cost. The 800MHz, 1800MHz and 2300MHz frequency bands are likely to witness the maximum activity.

A key factor is also the 5G spectrum (3.3GHz-3.6GHz) auction likely to be held later in 2021. The telcos need to be strategic about investing in this auction so they have resources left for the 5G spectrum.

If a large chunk remains unsold in this auction, it might push the case to bring down the reserve price of the 5G spectrum later this year.

Jio

With the largest EMD, Jio is going to be the most active bidder in the auction. It also has the lowest spectrum holding, and a significant chunk of its spectrum is up for renewal.

The service provider is also flush with funds, which it is likely to use to acquire more spectrum. Besides, it also plans to launch 5G services later this year.

It needs to renew around 80MHz of spectrum in the 800MHz band in this auction. While the service provider has been vocal about the high price of the 700MHz spectrum, it is also the only player with resources to bid for this spectrum.

Considering that the 700MHz spectrum can be used for 5G, it is possible Jio will bid for it. In line with its 5G plans, the company is also likely to aim for the 10MHz spectrum in the 1800MHz band.

The company might also target the 2300MHz spectrum to enhance capacity.

Bharti Airtel

Airtel is likely to spend the maximum in the 1800MHz frequency band, where 57MHz is up for renewal in 2021, and another 12MHz in 2024 in eight circles.

Apart from renewal, the service provider may acquire more spectrum in this band as it moves closer to launch 5G. The company has recently conducted a 5G trial in 1800MHz, so this band would be of particular interest.

On several occasions, the telco has said that it doesn't plan to bid for 700MHz at the current rate. However, if Jio bids for this spectrum, Airtel might jump in the ring.

India's second-largest service provider is likely to renew the spectrum in the 900MHz band, as about 30MHz of spectrum in this band will expire in 2024.

Moreover, the telco has said that it will want to boost its holding in the sub-GHz band.

Vodafone Idea

It is clear from the EMD that Vodafone Idea is likely to bid only for spectrum in a few circles. This is likely to be that that is coming for renewal.

Vodafone Idea's strategy is in keeping with its poor financial health. The operator continues to look for investors to bolster its finances.

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Another reason for low EMD is that the company already has good spectrum holding compared to Airtel and Jio, which means that Vodafone Idea doesn't really have any pressing need to acquire more spectrum.

The company's 6.2MHz spectrum in the 900MHz band is expiring, and it will look to renew this. Further, some spectrum is expiring in the 1800MHz frequency band in eight circles.

One can expect some bidding in the 900MHz and 1800MHz by Vodafone Idea, while it remains largely subdued in the other frequency bands.

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— Gagandeep Kaur, contributing editor, special to Light Reading