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Thursday, April 22, 2021

Explained: What’s at stake in the spectrum auction, when will we know the winners?

The long-delayed spectrum auction for 4G airwaves began on Monday (March 1). What is expected?

Written by Aashish Aryan , Edited by Explained Desk | New Delhi |
March 1, 2021 2:10:35 pm
spectrum auction, 5g spectrum auction, Reliance jio, Mukesh Ambani, indian expressSince the spectrum auction that is being conducted this time does not contain any airwaves for 5G, most experts and analysts expect it to be a subdued affair.

The long-delayed spectrum auction for 4G airwaves, where the government is putting on offer frequencies in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz bands, began on Monday (March 1). A total 2,251 MHz of spectrum for a reserve price of Rs 3.92 lakh crore is up for bids.

What is expected in the spectrum auction?

Since the spectrum auction that is being conducted this time does not contain any airwaves for 5G, most experts and analysts expect it to be a subdued affair. Of the three private telecom operators, Mukesh Ambani-led Reliance Jio Infocomm has made an earnest money deposit of Rs 10,000 crore, while Bharti Airtel and Vodafone Idea have deposited Rs 3,000 crore and Rs 475 crore respectively.

The earnest money deposit is an indicator of the bidding strategy that a telecom company is likely to take during the spectrum auction. The higher the earnest money deposited, the more eligibility points the telecom company gets, thereby providing it freedom to bid on more airwaves in different service areas, provided the spectrum in that area is available.

According to Credit Suisse, Reliance Jio is likely to not only renew the 44 MHz spectrum that it had bought from Reliance Communication, but it will also buy additional spectrum in the 55 MHz spectrum owned by the latter in the upcoming auctions.

For this, Reliance Jio will incur a total capital expenditure of Rs 240 billion at reserve prices, and would require to make an upfront payment of nearly Rs 60 billion, if it were to opt for the long term deferred payment plan.

Since the earnest money deposited by Bharti Airtel is only Rs 3,000 crore, most analysts expect that while the telco may renew some of its old spectrum, it may not purchase fresh spectrum in the current auction.

How long will the spectrum auctions last time around?

Since there are only three big private players in the fray, most officials expect that the final results of the auction are likely to be announced within a day or two.

Apart from these private companies, new companies, including foreign companies. are also eligible to bid for these airwaves. Foreign companies, however, will have to either set up a branch in India and register as an Indian company, or tie up with an Indian company to be able to retain the airwaves after winning them.

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Officials, however, also said that there is minimal likelihood of any new players entering the telecom space this time around, and therefore, the final results may be declared by Tuesday.

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