5G spectrum bidding may not be aggressive, analysts say

Analysts have said that as there is sufficient telecom spectrum available for the 5G network, the bidding is unlikely to be aggressive.
Nomura in its report said that it estimates all the winning bids at the reserve prices with an overall spectrum outlay of potentially around Rs 1 trillion.

"The highest amount of spectrum available per player for 5G bands on a pan-India basis would be worth Rs 489 billion ($6.1 billion). Assuming both Rjio (Reliance Jio Infocomm) and Bharti Airtel bid to the maximum extent allowed, there would still be enough spectrum left to satisfy the maximum amount that the other two players can bid (based on their EMD amounts)," Morgan Stanley said.

The bidders for the spectrum are Reliance Jio Infocomm, Adani Data Networks Ltd, Vodafone Idea Ltd, and Bharti Airtel Ltd. They have paid their earnest money deposit (EMD) with Reliance Jio Infocomm Ltd at Rs 14,000 crore paying the highest amount.

As per the Department of Telecommunications (DoT), the EMD paid by others are Adani Data Networks Rs 100 crore, Vodafone Idea Rs 2,200 crore, and Bharti Airtel Rs 5,500 crore, news agency IANS reported.

Among the four, Reliance Jio's net worth is the highest, at Rs 1,97,790 crore. Bharti Airtel and Adani Data Networks have a net worth of Rs 75,886.8 crore and Rs 4,979.1 crore each while that of Vodafone Idea is Rs (-) 80,918 crore.

The eligibility points allocated for the bidders are Reliance Jio -159,380, Bharti Airtel - 66,330, Vodafone Idea - 29,370 and Adani Data Networks - 1,650.

The EMD money and eligibility points allocated to Adani Data Networks positions it to obtain spectrum amount of Rs 7-11.4 billion under different scenarios (spectrum winning price 8 -9.2x of EMD amount). This is under the assumption that Adani Data Networks bids for 5G bands (3300 Mhz or 26Ghz) for a few local service areas (LSA)/circles, Morgan Stanley said.

"Based on the location of the group's physical network of assets, it may be keen to bid for LSAs such as Gujarat, Andhra Pradesh and Maharashtra," the report added.

The payment of highest EMD gives Reliance Jio Infocomm the flexibility to go beyond 5G bands (3300 Mhz/26 Ghz) and bid either for the existing bands it has (800MHz, 1800MHz and 2300MHz) and/or new bands (600 Mhz,700 Mhz). The additional maximum amount of spectrum for other bands that Reliance Jio could go for would be Rs 545-736 billion ($6.8-9.2 billion), states the report.

Morgan Stanley states that the spectrum liability for Bharti Airtel could be higher going by its EMD paid.

The maximum spectrum that Bharti Airtel could bid would be Rs 489 billion ($6.1 billion) versus Morgan Stanley's base-case estimate of $2.4 billion in F2023.

Morgan Stanley had assumed cumulative spectrum liability related to 5G of $3 billion over FY 2023-24.

According to Nomura, with the 5G spectrum auction later this month, increasing share of 5G enabled phones and the Indian government's aim to commence 5G rollouts by August 15, 2022, the 5G rollout would start this year.

However, given the nascent 5G ecosystem (a modest about seven per cent of the overall smartphone base is 5G enabled) and evolving use, the roll out will be in metros and larger cities, Nomura added.

As per the DoT's Notice Inviting Applications, the applicants have time to withdraw by July 19, and the final list of bidders will be announced on July 20, 2022. The auction will start on July 26, 2022

(With inputs from IANS)