Telecom: Limited bidding on Day 1; majority bids for renewals

The telecom spectrum auction commenced on 25th Jun’24. As per the expectation, the auction saw bids mainly for renewals and capacity increases. Here are the key highlights: The Department of Telecom (DoT) received total bids worth INR97b on the first day of the spectrum auction.

• Bharti is likely to have spent ~INR54b, much ahead of our expectation, largely for 900MHz, 1800MHz and 2100MHz bands. Renewal is expected for 900MHz and 1800MHz bands. It seems that Bharti has done top-up spectrum in a few circles, attempting to improve its low-frequency footprint.
• VIL too seems to have spent around ~INR23b for 900MHz, 1800MHz and 2500MHz bands. Renewal is expected for 900MHz and 1800MHz bands.
• RJio is likely to have spent ~INR19b, mainly for 1800MHz, with limited participation on Day 1.
• Within the band range, 900MHz received bids worth INR61b (63% of total bids), 1800MHz saw bids worth INR29b (30% of total bids), and 2100MHz/2500MHz saw bids worth INR5b/INR1.5b (6%/2% of total bids).
• Yet we saw no price increase in any bands, underscoring the significantly high quantum of spectrum available across bands.
• Given the high quantum of spectrum available and enough caps to restrict aggression, there is limited need to spend heavily. The spectrum would carry a fixed interest rate of merely 8.65% on 20-year EMIs.
• There were no bids received for 800MHz, 2300MHz, 3300MHz and 26GHz.
• Five rounds of auction are completed on the first day. The auction is expected to complete in 1-2 day

How are the stacks placed for each player?

• Bharti – Going overboard: Bharti, in all probability, seems to have spent much more than our expectation, to the tune of INR54b. This would be attributed to renewal and top-up in some circles: a) INR42b for 900MHz (41.4MHz across 12 circles), b) INR7b for 1800MHz (10.2MHz across five circles), and c) top-up of spectrum in 2100MHz to the tune of ~INR5b (20MHz in four circles).
• RJio – Limited participation: Going by its high earnest money deposits, RJio was expected to be the highest bidder in the auction. However, as per our assumptions, it has shown limited participation on Day 1 – INR19b for 1800MHz (26.6MHz across six circles).
• VIL is likely to have spent INR23b for renewal bids and top-ups in some circles: a) INR19b for 900MHz (14MHz across five circles), b) INR3b for 1800MHz (4.4MHz in two circles), and c) top-up of spectrum in 2500MHz to the tune of ~INR1.5b (10MHz in 1 circle).

Spectrum-wise bidding: 900MHz/1800MHz bands see strong participation.

• 900MHz saw total bids worth INR61b (63% of total spectrum and 55.4MHz), with the majority of them for renewals. For this band, 14 out of 22 circles saw bids, with the bid price similar to the reserve price. However, given that there is significant quantity of spectrum available, it saw no price increase in any circles. We believe that Bharti would have bid maximum as renewals were due in six circles and may have bolstered its low-frequency spectrum. VIL may have bid for the rest as renewals were due in two circles.
• 1800MHz saw total bids worth INR29b (30% of total spectrum and 41.8MHz) for renewals and top-ups. For this band, 10 out of 22 circles saw bids, with two circles (Bihar and WB) seeing a marginal increase from the reserve price. We believe RJio is likely to have bid for INR19b (for increase in capacity), Bharti would have bid for INR7b for renewals and capacity increase, and VIL may have bid for INR3b for renewals.
• 2100MHz and 2500MHz – Spending was marginal at INR5b/INR1.5b in 2100MHz/2500MHz, which would have been done by Bharti/VIL as they already have a presence in the respective bands

For report, http://institution.motilaloswal.com/emailer/Research/TEL-20240626-MOSL-SU-PG008.pdf

CT Bureau