India’s upcoming 5G spectrum auction, beginning on Tuesday.
Reliance Jio, Bharti Airtel, and Vodafone Idea are expected to collectively spend Rs 12,500 crore on spectrum purchases, constituting approximately 13% of the total value of Rs 96,320 crore. Unlike the 2022 auction that generated a record Rs 1.5 trillion for the government, this one is anticipated to be less lucrative.
Experts: Limited Enthusiasm in 5G Auction Due to Existing Holdings and Application Gap
According to The Economic Times, analysts attribute the subdued interest in the upcoming spectrum sale to adequate 5G holdings by Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi), coupled with a lack of consumer-focused applications. The report suggests these telecom giants may collectively acquire approximately Rs 12,500 crore worth of spectrum, representing about 13% of the total Rs 96,320 crore available.
According to the report, Bharti Airtel and Vodafone Idea are expected to primarily renew their current spectrum holdings in certain frequency bands or make minimal new acquisitions. Meanwhile, Reliance Jio, which has no imminent renewals, is considering purchasing additional spectrum in the 1800 MHz band to bolster its portfolio.
Modest EMDs Reflect Conservative Approach in 5G Spectrum Auction
In anticipation of subdued bidding, telecom companies have submitted earnest money deposits (EMDs) ranging from Rs 300 crore to Rs 3,000 crore for the upcoming 5G spectrum auction. These deposits mark the lowest since 2014 and are significantly reduced by 79-86% compared to the previous 5G auction in 2022.
Notably, Jio’s EMD of Rs 3,000 crore surpasses Bharti Airtel’s by nearly threefold and Vodafone Idea’s by tenfold.
In the 2022 5G Spectrum Auction, Bharti Airtel faced competition from Jio and Vodafone Idea for renewing airwaves in Uttar Pradesh (East), particularly in the 1800 MHz band, leading to a winning bid that was 76% higher than the base price. However, aside from specific regions, telecom companies are not expected to display significant interest in the upcoming auction, which will offer 5G spectrum across eight bands: 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3.3 GHz, and 26 GHz.
Payment Options in Spectrum Auction
Telecom companies in the upcoming auction can choose between upfront full payment or instalment plans. Opting for instalments is projected to generate Rs 1,200 crore for the government in the first year.
Interest Costs and Strategic Payments
Paying the entire amount upfront can reduce telcos’ interest expenses, given the higher interest rate of 8.65% for deferred payments in this auction, compared to 7.2% in the previous one. Bharti Airtel recently cleared its spectrum auction dues to avoid increased interest charges.
Anticipated Spending and Renewals
Experts anticipate Bharti Airtel to lead spending in the auction, particularly to renew licences in key circles like Assam, Bihar, Jammu and Kashmir, Odisha, Uttar Pradesh East, and West Bengal. Vodafone Idea is expected to focus on renewing spectrum holdings in West Bengal and Uttar Pradesh West.
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