India's $53.5B spectrum auction to start in March

India has invited applications for a major auction of spectrum despite the likelihood some airwaves will remain unsold as operators wrestle with huge debts.

The auction will include 2,251.25MHz of spectrum across the 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz bands and is set to begin on March 1.

While licenses, valid for 20 years from the date of issue, have been valued at a jaw-dropping 3.9 trillion Indian rupees ($53.5 billion), it is inconceivable that operators will spend this amount.

Market leader Reliance Jio is the only operator with a critical need for spectrum: Its licenses in 12 circles (service areas) are due for renewal later this year, while spectrum it has shared with Reliance Communications, which filed for bankruptcy in 2019, is also set to expire in July.

Although Bharti Airtel and Vodafone Idea also have some spectrum in the 1800MHz band that will soon expire, both have backup airwaves. Given its poor financial health, Vodafone Idea may skip the process altogether.

Because Bharti Airtel gained spectrum with its takeovers of Videocon and Tata Teleservices, it could also decide to sit out bidding for airwaves in some bands.

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At $4.4 billion for a 5MHz block, the pricing levels set for the 700MHz spectrum are deemed high by all the telcos, and so there is unlikely to be much interest in this band. Unless prices were lowered, Jio would be the only operator with the financial strength to acquire 700MHz spectrum. A license in this band could support its plans to launch a 5G service later this year, with chipmaker Qualcomm, a Jio partner, having demonstrated that 700MHz can be used to support 5G services.

Uncertainty surrounding government plans for a 5G auction of spectrum in the 3.3-3.5GHz band is a further complication. That auction should have been held last year but was postponed due to the coronavirus pandemic. Operators have now asked the government to share its latest roadmap for the process, which should help them to formulate strategies for the March auction.

Auction rules

Interested applicants need to submit their applications by February 5, and they will be able to withdraw them until February 22. Prospective bidders can also seek clarification about the rules until January 15 and receive information up to January 28. A mock auction will be held on February 26.

Further, successful bidders will need to pay the bid amount within ten days of the demand note issue. MSTC Ltd will act as the auctioneer for this particular sale, having been appointed as a government advisor.

A Notice Inviting Applications (NIA) issued by the government says that successful bidders will have the option to pay the entire bid amount upfront or in instalments. Bidders will also be required to pay a 3% charge in so-called Adjusted Gross Revenue (AGR) fees.

— Gagandeep Kaur, contributing editor, special to Light Reading