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    Spectrum auction ends with Rs 77,815 crore bids; Jio top buyer with Rs 57,122 crore

    Synopsis

    Telecom Secretary Anshu Prakash said 855.60 MHz of spectrum was bought for Rs 77,814.80 cr in the two-day auction. Reliance Jio bought Rs 57,122.65 crore worth of spectrum while Vodafone Idea Ltd picked Rs 1,993.40 crore worth of airwaves. Bids were received in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz bands but there were no takers for the airwaves in the premium 700 and 2500 MHz bands.

    Telecom Spectrum auctions fetch Rs 77,815 cr; Reliance Jio top bidder with Rs 57,122 cr
    New Delhi: India’s first spectrum auction in five years ended on day two, with the government mopping up ₹77,814 crore. The government will get ₹19,000-20,000 crore in upfront payment this month, and around ₹10,000 crore in the next fiscal.

    Reliance Jio, which faced a must-buy situation in 18 circles to ensure continued service, bid for 488.35 MHz of bandwidth worth ₹57,122.65 crore, and accounted for 73% of the total auction proceeds. Bharti Airtel bought 355.45 MHz of spectrum for ₹18,698.75 crore, and Vodafone Idea, financially the weakest of the three private telcos, paid ₹1,993.40 crore to buy 11.8 MHz of airwaves across five circles.

    RIL chairman Mukesh Ambani said with increased spectrum footprint, Jio was ready to further expand its digital footprint as well as get ready for the imminent 5G rollout. “We want to ensure that we keep on enhancing experiences, not only for our existing customers, but also for the next 300 million users that will move to digital services,” he said.

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    Telcos' Debt to Hit ₹5 LCr by March 2022: ICRA
    While Jio and Airtel renewed their airwave holdings, adding airwaves to boost 4G coverage and cater to rising data usage as well as to use them for 5G in the future, Vodafone Idea gave up 100 MHz of airwaves in the 1800 MHz band which are expiring in July. Like in 2016, telcos gave the 700 MHz a miss, owing to its high base price.

    Jio bought most of its airwaves in the 800 MHz band, which it needed to renew, for ₹34,491 crore, and added some more in the 1800 MHz and 2300 MHz band.

    Analysts expect the auction to further consolidate market share between Airtel and Jio at the cost of Vodafone Idea, which has been lagging its rivals in terms of 4G coverage mainly due to its limited capex spend amid financial challenges.

    Credit rating agency ICRA said after the auctions, the debt levels of the telecom industry would rise to around ₹5 lakh crore by March 2022. “ Despite the improvement in the operating metrics, the debt protection metrics will continue to remain weak,” said ICRA’s Ankit Jain.

    Bharti Airtel MD & CEO (India & South Asia) Gopal Vittal said the company now had a solid spectrum portfolio that would enable it to continue delivering the best mobile broadband experience in India. Airtel bought spectrum in the 800 MHz band as well as the 900 MHz bands, both known as sub-GHz bands, besides in the 1800 MHz and 2300 MHz bands, and a small quantity of 2100 MHz band.

    Vodafone Idea said that it had bought airwaves in five circles which will help it enhance its 4G coverage. It added that it had only a “small fraction” of its holding of non-auctioned spectrum being used for 2G services coming up for renewal.

    Jio said it will pay ₹19,939 crore upfront, while for Airtel, the upfront amount will be around ₹7,000 crore.

    “.. what we have noticed is that they (telcos) have consolidated their positions in the bands in which they were operating and taken spectrum in particular bands where they felt they had less spectrum,” telecom secretary Anshu Prakash told reporters.

    He added that the carriers could always buy the 700 MHz band in the next sale. “In 700 MHz, the 5G ecosystem is also developing as it is developing in the mid band 3.3-3.6 GHz. So, there can be a possibility that in the next auction, the 700 MHz band also is used,” Prakash said.

    Both Airtel and Vodafone Idea called for the reserve price of 700 MHZ and 3300-3600 MHz bands to be reduced before the next sale.

    Prakash said that the DoT will refer the matter to the telecom regulator to take a relook at the pricing. The Telecom Regulatory Authority of India (Trai) had cut the 700 MHz price by 43% before the just ended sale, after the band went unsold in 2016.

    India auctioned over 2,308 units across the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands, of which 855.60 MHz, or 37%, was sold. The auction lasted six rounds and all airwaves were sold at the base price. The lack of interest in the 700 MHz band meant that sale proceeds fell well short of the ₹3.92 lakh crore that the government could have generated had all airwaves on offer been sold at base price.

    “We believe Jio may have largely closed its gap with Bharti and Vodafone Idea on total spectrum,” Goldman Sachs said in a report. “We believe Bharti and RIL bolstering their spectrum footprint will further aid their market shares relative to Vodafone Idea”.

    Nitin Soni, senior director at global ratings agency, Fitch, said non-renewal of a portion of its 1800 MHz spectrum could further weaken Vodafone Idea’s market position, and it may continue losing customers and revenue share to Jio and Airtel.

    After the auctions, Jio will hold around 1,717 MHz of airwaves, Airtel around 2086 MHz and Vodafone Idea, around 1858 MHz, analysts said.

    Airtel’s bidding was higher than expected as it completed 5MHz spectrum in the 800MHz band, and bought additional spectrum in 900MHz, which will be up for renewal in 2024, said ICICI Securities. “Bharti’s bidding was focused on strengthening sub-GHz spectrum, and capacity spectrum in 2,300MHz.”

    The duration of this spectrum sale was the shortest after the 2013 auction which had ended in just four hours. Despite the short duration, the sale fetched the highest amount since the 2015 auction, which had netted ₹1,10,000 crore over 19 days.

    “From the government’s point of view, this was a successful auction but they need to revisit the economics of the 700 MHz which has remained unsold now for two consecutive auctions. The telcos have mainly renewed their spectrum but this adds $10 billion of debt to the industry,” said Prashant Singhal, emerging markets TMT leader, EY. “The auctions will improve the service level but the outflow will necessarily force the sector to relook at its economics.”

    On Day 1 of the airwaves sale, the government had garnered ₹77,146 crore, over 71% higher than what it had expected.

    Over the day and a half, the 2300 MHz band saw the maximum interest with 89% of the bandwidth on offer taken up, primarily by Jio and Airtel. Around 65% of the 800 MHz band on offer was sold as Jio needed to renew its permits in 18 circles to ensure business continuity. Airtel also bought some in the 800 MHz band to augment the airwaves it had bought from Tata Teleservices.


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    ( Originally published on Mar 02, 2021 )
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