Telecom companies bid higher in spectrum auction to counter Jio
Market leaders like Bharti Airtel, Vodafone and Idea have gained adequate 4G spectrum to counter Jio, according to the analysts.
In the largest ever telecom spectrum auctions in India, which got concluded on October 6, government garnered Rs 65,789 crore with the sale of 965 MHz airwaves in India. Vodafone led the charts with an investment worth Rs 20,000 crore, while Airtel, Reliance, Idea, Aircel, Tata also invested heavily in the auction.
After the launch of Reliance Jio, competition between the leading tel companies scaled new heights because of free 4G data along with free calls offered by Jio. But in this auction, market leaders like Bharti Airtel, Vodafone and Idea have gained adequate 4G spectrum to counter Jio, according to the analysts.
Even though the sale was barely 40% of the total airwaves on auction, analysts are optimistic about tight competition in the telecom market as they believe that the appetite may be driven by improvement in capacity utilisation, led by data growth.
"We now believe that the top three telcos have adequate 4G spectrum to counter Jio, making it more competitive to poach subscribers. We now also see faster consolidation among smaller telcos, given lack of data spectrum," Bank of America Merrill Lynch said in a report.
It added that the top three operators, however, still lack a sub-1 GHz 4G band that Jio has and therefore, there is a possibility that these companies may purchase spectrum in the 700 MHz in future.
"With 60 per cent airwaves witnessing no bidding, the muted response is indicative of operators' reluctance to invest heavily at current market prices," EY Global Telecom Leader Prashant Singhal said.
Steep pricing of 700 MHz band kept operators away from bidding for the efficient frequency band that alone had the potential to fetch over Rs 4 lakh crore at the base price to the government. According to experts, financial strain on the industry and unrealistically high reserve price were the major reasons for the 700 MHz band not getting any bidder.
"Telcos bought more spectrum than what we had anticipated, and at 50-60 MHz of average spectrum holding per circle, we do not expect Bharti and Jio need additional spectrum in the near-to-medium term," said Goldman Sachs.
It added that while Vodafone and Idea bought 2500 MHz spectrum in the auction, neither of them has plugged all their 3G/4G gaps and instead consolidated holdings in many existing circles.
Market leader Bharti Airtel acquired 173.8 MHz spectrum in bands of 1800MHz, 2100 MHz and 2300 Mhz for Rs 14,244 crore in circles including Kerala, Assam, Maharashtra, Delhi, Mumbai and the North-East.
Idea acquired 349.20 MHz of spectrum for Rs 12,798 crore in 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands and will be able to offer 4G services on its own spectrum across 20 circles, including nine new service areas of Uttar Pradesh (West), UP (East), Gujarat and Mumbai.
Vodafone India, which has emerged as the most aggressive bidder, has acquired spectrum in 1800 MHz, 2100 MHz and 2500 MHz bands for a total cost of Rs 20,280 crore. It has 17 circles with 4G capability.