India 4G Spectrum Auction Raises 778 billion Rupees

After much delay, India’s 4G spectrum auction has ended in just two days, raising Indian Rupee (INR) 778 billion (US $10.6 billion) for the government. The auction was held on March 1st and 2nd by India’s Department of Telecommunications.  The airwaves acquired will help India’s telecom network operators add 4G capacity and get ready for 5G.

India auctioned spectrum in the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz frequency bands. However, the 700MHz spectrum remained unsold because of the high reserve price.

India telecom network operators Reliance Jio, Bharti Airtel, and Vodafone Idea won spectrum in the government’s latest auction.

India’s largest telco, Reliance Jio announced it has acquired the right to use spectrum in all 22 circles across India in the auction. The upstart network operator secured spectrum in the 800 MHz, 1800 MHz and 2300 MHz frequency bands, which increases Jio’s spectrum footprint by 55 percent to 1,717 MHz.

Jio will pay INR 571.23 billion for the right to use this spectrum for a period of 20 years. Payments can be made over a period of 18 years (2-year moratorium plus 16-year repayment period), with interest at 7.3 percent per year.

Reliance Jio now claims to have the highest amount of sub-GHz spectrum with 2×10 MHz contiguous spectrum in most circles. It also has at least 2×10 MHz in the 1800 MHz band and 40 MHz in the 2300 MHz band in each of the 22 circles. The operator also reports it has achieved complete spectrum derisking, with average life of owned spectrum of 15.5 years. Reliance Jio will acquire the spectrum with an effective cost of INR 608 million per MHz. Jio also says the acquired spectrum can be used for provision of 5G services.

“The acquired spectrum can be utilized for transition to 5G services at the appropriate time, where Jio has developed its own 5G stack,” says the Jio press release.

India’s second-largest network service provider, Bharti Airtel acquired 355.45 MHz of spectrum across sub-GHz, mid-band and 2300 MHz bands for a total price of INR 186.99 billion. Airtel will use this spectrum to upgrade its deep indoor and in-building coverage in urban towns. In addition, this spectrum will also help improve its coverage in villages by offering the superior Airtel experience to an additional 90 million customers in India. Airtel also plans to use this spectrum to deliver 5G services in future.

An Airtel statement mentioned that the “the reserve pricing of these bands [700MHz and 3.5GHz] must be addressed on priority in future. This will help the nation to benefit from the digital dividend that will inevitably arise out of this.”

“Airtel has now secured pan-India footprint of sub GHz spectrum that will help improve its deep indoor and in building coverage in every urban town,” as per the company’s statement.

Vodafone Idea entered this spectrum auction “holding the largest quantum of spectrum with a very small fraction, which was administratively allocated and used for GSM services, coming up for renewal”.

As a result, Vodafone Idea acquired spectrum in only five circles for INR 19.93 billion. The operator said it has used this opportunity to optimize spectrum holdings post-merger to create further efficiencies in a few circles. Vodafone Idea expects the spectrum it has acquired in five circles to help it enhance its 4G coverage and capacity.

 

India’s just completed spectrum auction does not contain any airwaves for 5G

……………………………………………………………………………………………

Reliance Jio’s decision to be the biggest spenders at the auction comes shortly after its holding company, Jio Platforms, reported ₹22,858 crore in revenue during the quarter to December, which was a 30% improvement from the year prior.

Last year, Jio Platforms sold a third of itself to others for ₹152,056 crore. Buyers included Google, Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton, PIF, Intel Capital, and Qualcomm Ventures.

References:

https://www.bloombergquint.com/business/india-sells-spectrum-worth-rs-77000-crore-as-operators-add-4g-capacity-focus-on-5g

https://www.telecompaper.com/news/india-completes-spectrum-auction-raises-inr-778-billion–1374417

2 thoughts on “India 4G Spectrum Auction Raises 778 billion Rupees

  1. The strengthening of spectrum footprints by Bharti Airtel and Reliance Jio in the just-concluded auctions is expected to yield market share gains for the two telcos, arming them with sustainable advantage in the long run and for 5G play, according to analysts.

    With the auctions over, the key things to be monitored would be Vodafone Idea Ltd’s (VIL) balance sheet and its potential capital raise, signals of price hike, launch of a Jio-Google smart phone, and 5G spectrum auctions, they noted.

    Analysts across-the-board concurred with the government’s view that at Rs 77,814 crore of total bids, the spectrum auction outcome and response had surpassed expectations.

    Goldman Sachs noted that Bharti and Jio had “significantly” bolstered their spectrum footprints, and that strengthening of radiowave holdings “could aid their market shares while at the same time keeping capex under check”.

    In all service areas and bands, spectrum was sold at reserve prices, indicating that this higher-than-expected participation was a function of telcos looking to secure their medium-term spectrum needs rather than a result of a bidding war, it said.

    With the spectrum auctions done, Goldman Sachs said it believes that investor focus will now shift to VIL’s balance sheet and its potential capital raise, signals of tariff hike, launch of a Jio-Google smartphone, and 5G spectrum auction.

    The more-than-expected participation from telcos in the auctions increases the probability of a price hike as a way to offset increase in leverage, market watchers said.

    “While the March ’21 auction was largely a non-event for Vodafone Idea, the company’s limited ability to participate in future 5G spectrum auctions (due to its stretched balance sheet) could result in further erosion of its market share,” Goldman Sachs said.

    Moody’s Investors Service said spectrum renewals will help incumbents protect their market positions while additional bandwidth purchases will drive improved network coverage.

    “Indian telcos’ spectrum acquisition can be accommodated in their current ratings, particularly amid the stabilising competitive environment. Some have recently raised funds while others have large cash holdings to support the acquisitions,” Sweta Patodia, Analyst, Corporate Finance Group at Moody’s Investors Service said.

    BofA Securities highlighted that a key question is whether Jio would undertake tariff hikes to help offset the higher bids and investment.

    “The initiative for tariff hike should largely come from VIL as it is the most in need of it; RIL (Reliance Industries Ltd) management is unlikely to take a knee-jerk reaction of raising tariffs just because it spent more in auctions; while in medium-term RIL is keen to raise tariffs, we believe in the near term, RIL focus could be gaining subscribers (especially on 2G)…,” BofA Securities said in a note.

    In fact, both Jio and Bharti, are expected to focus on improving their market share in the near term given their stronger balance sheets as compared to VIL, it concluded.

    Observing that Bharti and Reliance had taken initial steps to fortify their 5G radiowaves, it reiterated that the two will have “sustainable advantage in the long run, with them fortifying their 5G spectrum”.

    “Post this auction, we see risks of VIL having disadvantage in 5G given its weaker balance sheet,” it said.

    Post auctions, there is likely to be a crash in spectrum prices, “a positive for 5G auctions”, CLSA said.

    This is because, with 63 per cent of the spectrum in this auctions unsold, cuts in reserve prices are likely.

    “Historically, the government has cut spectrum prices by 30-40 per cent if it saw no demand in the previous auction and this will be a significant positive especially for 5G,” it said.

    Also, in the future 5G auctions with the 275 MHz spectrum available in 3.3-3.6GHz bands alone (besides other bands) and only three operators, there will be good supply, it pointed out.

    “Auction spending has caused RJio spectrum debt burden to jump 144 per cent to Rs 631 billion/ USD 8.6 billion and it is now 10 per cent higher than Bharti Airtel’s Rs 576 billion/ USD 7.9 billion,” it said.

    Still, VIL’s spectrum burden is the highest among the three operators at Rs 95,400 crore.

    VIL’s muted participation in these auctions was on expected lines and needs to be seen in the context of its cash flow constraints and customer market share already lost, Credit Suisse said in a note.

    While Jio is likely to focus on reviving subscriber growth in the near term, over the medium term it will have to take price hikes to support network investments and upcoming 5G roll out, Credit Suisse said.

    India’s first auction of telecom spectrum in five years ended on Tuesday with Rs 77,814.80 crore of airwaves being acquired by telcos, mostly by billionaire Mukesh Ambani’s Reliance Jio which picked up spectrum for Rs 57,122.65 crore. Jio acquired 488.35 MHz spectrum in bands such as 800 MHz, 1800 MHz and 2300 MHz.

    Bharti Airtel bid about Rs 18,699 crore to pick up 355.45 Megahertz (MHz) out of the total 855.60 MHz of radio frequency acquired by all telcos while VIL, which is facing a huge liability of unpaid statutory dues of the past, bought 11.80 MHz of spectrum worth Rs 1,993.40 crore.

    https://telecom.economictimes.indiatimes.com/news/spectrum-acquisitions-to-yield-market-share-gains-for-jio-airtel-analysts/81310496

  2. India’s telecommunications and IT minister Ravi Shankar Prasad interview with Economic Times of India:

    The 4G auctions have just ended, but the government could sell only 37% of the spectrum. Why?
    Please look at it in the larger context. Out of the Rs 4 lakh crore amount that we had fixed, the prime band was not auctioned. Yet, we could get Rs 78,000 crore. In 2016, there were seven players, this time only three. This only shows that players are keen to offer good 4G services for consumer satisfaction. The government expected only about Rs 45,000 crore. Why did the operators purchase so much? This means there is a strong business case to buy the resource.

    Will the government reduce the price of the 700 MHz band?
    If a band is untouched in the auction, then we send it to Trai (Telecom Regulatory Authority of India) for fresh pricing.

    Experts say the telecom sector has seen huge erosion of wealth in the last few years…
    Numbers indicate the exact opposite. Number of smartphones has risen from 16.5 crore in 2014 to 70 crore in 2020. Smartphones nowadays mean mobile computers. Data usage has increased 130 times — from 89.4 MB per subscriber per month in 2014 to 12.1 GB in 2020. Therefore, this shows a surge in consumer appetite. Data tariff has decreased more than 23 times — from Rs 269 per GB to Rs 10.95 per GB, because of fair competition. Total Internet subscribers are 77.6 crore, tele-density is at 86.22%, broadband subscribers are 72.6 crore. Therefore, there is a proliferation of telecom networks and broadband services everywhere.

    Telcos, however, say they are still in heavy debt, prices are too low, that they are still suffering due to high levies. Even now, there are fresh cases related to AGR (adjusted gross revenue).
    Let me make an appeal to the TSPs (telecom service providers) as both the communications and the law minister. They have fought too many legal battles. That is their right. They have spent too much of their earnings on legal expenses. That too is their right. But they must now address greater challenges and opportunities for India because of the stability that has arisen because of the judgements. We have already undertaken a series of reforms.

    What is your outlook for the year ahead?
    I see keenness for 5G among telcos. We are keen to promote the 5G ecosystem in India. Both in terms of stacks and also services.

    When will you notify the 5G trials? Will 5G auctions be held this year?
    We will come up with the roadmap for 5G trials and auctions very soon. What I want to share with you is that Made in India 5G ecosystem must come and we are in touch with big corporate houses. They have promised us that very soon, they will come with it.

    https://telecom.economictimes.indiatimes.com/news/there-was-a-strong-business-case-to-buy-spectrum-ravi-shankar-prasad/81384940

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

*

 
 

 

Solve : *
36 ⁄ 18 =