Muted bidding expected in upcoming spectrum auction

India is all set to conduct a spectrum auction starting June 6, 2024. The three major private telcos, Reliance Jio, Bharti Airtel and Vodafone Idea, recently deposited earnest money deposits (EMD), which reveals the strategies the participants are likely to adopt in the upcoming auction.

Jio deposited the highest EMD of INR30 billion ($359 million), followed by Airtel’s INR10.5 billion ($125.8 million) and Vodafone Idea with just INR3000 million ($35.96 million).

Collectively, the telcos have deposited INR43.5 billion ($0.5 billion) as EMD, which means that they will spend a maximum of INR520 billion ($6.2 billion) on purchasing spectrum. A telecom company can bid 11 to 12 times of the EMD amount. This means that as per the EMD deposited, Jio can bid a maximum of INR360 billion ($4.32 billion), Bharti Airtel for INR126 billion ($1.51 billion) and Vodafone Idea for INR36000 million ($432 million).

Nearly 10523.15 MHz of spectrum across several frequency bands, including 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz, and 26 GHz, will be put for sale. As per the base price set by the Department of Telecommunications (DoT), spectrum worth $11.65 billion will be up for grabs.

Overall, the auction is expected to be subdued as telcos already own a significant amount of spectrum required for 5G. The country’s top two telcos, Reliance Jio and Bharti Airtel, have already launched 5G across the country, and together, they have around 175 million subscribers. With 5G monetization likely to be the focus area of the telcos, investment on additional spectrum is likely to be muted.

The previous auction

The last auction in August 2022 saw the sale of 72,097.85MHz and generated INR1.5 trillion ($0.018 trillion) for the Indian Government. While 600 MHz and 700 MHz were put on sale in 2022, that is not the case this time around. Here is the low down on the spectrum acquired by the telcos in the last auction:

Name of the telco	Key spectrum acquired in 2022 auction	Total spectrum purchased	Amount Spent
Reliance Jio	700MHz spectrum in 22 circles 26GHz spectrum in 22 circles	24,740 MHz	$10.57B
Bharti Airtel	3300MHz spectrum in 22 circles 26GHz in all 22 circles	19,867 MHz	$5.17B
Vodafone Idea	3300 MHz spectrum in 17 circles 26GHz band (mmWave 5G) in 16 circles	6,288 MHz	$2.24B

The Upcoming Auction

Reliance Jio

It is unclear as to why Jio has deposited the highest EMD when it already has a significant amount of spectrum in most bands. Jio is the only service provider with a pan-India 700Mhz spectrum. It is possible that Jio may bid for 800 MHz spectrum which can reduce the cost of deploying networks.

Bharti Airtel

India’s second-largest service provider, Airtel, needs to renew its license in six circles (service areas) of Orissa, UP East, West Bengal, Bihar, Assam, and J&K. The service provider will need to acquire spectrum in these circles to continue providing services. Apart from that the company is is also likely to bid for 900MHz spectrum in a few circles, like Kerala, Uttar Pradesh West, Karnataka, Rajasthan and Tamil Nadu, where it has limited spectrum.

Airtel’s CEO, Gopal Vittal, spoke about low capital expenditures this year in a recent earnings call. The company has deployed 5G using 5G Non-Standalone (NSA) mode, while its competitor Jio has deployed using 5G Standalone (SA). Airtel is likely to focus on 800 MHz and 900 MHz bands to transition to 5G SA as the 5G ecosystem matures.

Vodafone Idea

Vodafone Idea also needs to renew the 12MHz spectrum in 1800MHz and 900MHz bands in West Bengal and UP West circles and will bid for spectrum in these areas. The service provider had spent the least in the last auction and it maintains the pattern with low EMD this time around as well. This is mainly because of its high debt. The company plans to launch 5G services later this year.

Overall, a sizeable amount of spectrum is likely to remain unpurchased in this auction because telcos do not have a pressing need to purchase it.