India to hold auction for spectrum worth ₹96,318 crore on Tuesday

India will put airwaves worth ₹96,317.65 crore on sale on Tuesday as it begins this year’s spectrum auction where private sector telecom service providers Reliance Jio, Bharti Airtel Ltd and Vodafone Idea Ltd will compete.

The three carriers, with nearly 1 billion mobile phone subscribers between them, are expected to spend about ₹15,000 crore to buy airwaves across 4G and 5G bands, according to a rough calculation based on some brokerage reports. The department of telecommunications (DoT) will conduct the auction to sell radio frequencies across the 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 2,500 MHz, 3,300 MHz and 26 GHz bands.

Reliance Jio, Bharti Airtel and Vodafone Idea have collectively submitted ₹4,350 crore as earnest money deposit, according to DoT data. Reliance Jio, India’s largest telecom firm, has deposited ₹3,000 crore, while Bharti Airtel and Vodafone Idea deposited ₹1,050 crore and ₹300 crore, respectively.

The deposits mean that each telco can bid three to four times the amount. However, sector watchers say that Airtel and Vodafone Idea would be looking to renew airwaves in some circles, while Jio may add airwaves in the 800 MHz band. Jio is expected to spend about ₹3,700 crore as it may increase its spectrum holding in certain circles in the band.

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Airtel could spend a minimum of ₹3,800 crore as it will have to renew 42 MHz of spectrum in the 1800 MHz and 900 MHz bands in six circles, Jefferies said in a note. It may also bid in certain circles to increase its holding in the 800 MHz/1800 MHz bands to 10-15 MHz, and in the 2300 MHz band to 40 MHz. This could lead to a maximum spend of ₹12,300 crore.

Besides renewal, Airtel will add at least 25,000 5G sites in the circles of Maharashtra, Gujarat, Madhya Pradesh and Chhattisgarh, Kerala and West Bengal to improve rural coverage, for which it has adequate spectrum.

Vodafone Idea, which recently raised ₹18,000 crore from what was the country’s largest follow-on public offer, has decided against renewing some its spectrum in the circles of West Bengal and Uttar Pradesh West, where renewals for 12 MHz in the 1800 MHz and 900 MHz bands were due. Therefore, it would end up reducing its spend on renewals from ₹1,500 crore to ₹200 crore for just the 900 MHz band.

The auction is expected to be limited in scale compared to the 2022 bids, which generated a record ₹1.5 trillion from the sale of 72,097.85 MHz of radio frequencies. The reason for the high bids was that 5G auction was being put on sale for the first time.

Overall, about 17% of the spectrum value is likely to be sold, which could be the lowest in any auction since 2014. No excess demand in any circle or band is expected to be sold, implying that spectrum may be sold near reserve prices.

Read more | Jio, Airtel and Vi deposit ₹4,350 crore for spectrum auction

The DoT has not included any spectrum in the 600 MHz and 700 MHz bands in the upcoming auction. Spectrum reserve prices have been increased in 3,300 MHz and 26 GHz bands by 12% and 8.9%, respectively. Reserve prices of the 1,800MHz band have been increased largely in Uttar Pradesh East. Spectrum base prices have been raised by 11-14% in bands or circles that saw demand in the 2022 auctions.

The auction, which was originally scheduled for 20 May, has been postponed twice to finally take place on 25 June.

While Mint had reported earlier this year that the government is expecting to mop up about ₹10,000 crore from the sale, various brokerage reports leading up to the sale on 25 June have said that the auctions may fetch the government anywhere between ₹4,000 crore and ₹16,600 crore.

The spectrum bought in this auction will be valid till 20 years from the effective date of purchase; spectrum sharing, trading and leasing norms remain unchanged. Telcos are allowed to surrender spectrum after 10 years from the effective date of purchase. Telcos can make a part payment of at least two years’ instalment, or multiples of complete years from thereafter. The buyer will have the option to avail moratorium for the corresponding number of years of upfront payment. For instance, three years of upfront payments would entitle a company for three years of moratorium. The other option is to pay up in 20 yearly equal instalments with the first instalment due in 10 days of completion of auction. Pre-payment of spectrum dues is allowed without any penalty.

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