5G spectrum auction scheduled today

The auction of spectrum scheduled today puts airwaves worth Rs 96,317.7 crore on the block.

Bharti Airtel Ltd., Reliance Jio Infocomm Ltd. and Vodafone Idea Ltd. have cumulatively deposited an earnest money of Rs 4,350 crore. implying a muted demand for spectrum. Successful bidders need to make payment within 10 days.

Successful bidders need to make payment within 10 days and will be allowed to make payment in 20 equal annual instalments at an interest rate of 8.65%. The maximum limit for bids is 12 times the earnest money deposited by the company, according to the auction rules of the Telecom Regulatory Authority of India. The spectrum will be assigned for 20 years and after a minimum of 10 years, the telecom companies will also have the option to surrender the spectrum they acquired through the auction, as per the rules.

Jio has the highest bid potential of Rs 36,000 crore, but it requires the least spectrum. The telco bought spectrum in the previous two auctions, and no spectrum is up for renewal. The telecom company has a spectrum portfolio in the sub-GHz band, aggregating 5x20MHz spectrum in the 700MHz and 800MHz bands.

Bharti Airtel is the second largest at 20%. The telco has renewals for 42 MHz of spectrum in the 1,800 MHz and 900 MHz bands in six circles. At the reserve price, this would result in spending of Rs 3,800 crore. It may also bid in certain circles to increase its holding in the 800MHz/1,800MHz bands to 10–15MHz and in the 2,300MHz band to 40MHz, leading to a maximum spend of Rs 12,300 crore, opines Jefferies.

Vi is not too far behind at 16% as it aggressively bids to regain its original spectrum holding in these bands during the 2014 and 2015 spectrum auctions. According to Jefferies, the telco may also look to renew the 12 MHz of spectrum in the 1,800 MHz and 900 MHz bands in two circles, with a total spend of Rs 1,500 crore.

CT Bureau