“Spectrum will be offered for assignment for validity period of 20 years. A total of 2251.25 MHz is being offered with total valuation of Rs 3,92,332.7 crore (at reserve price),” the government said in a statement Wednesday.
Spectrum in seven frequency bands ranging from 700 MHz to 2500 MHz will be offered to the telcos. The auction will not include 5G airwaves in the 3300-3600 MHz bands, which could throw a spanner in Jio’s plan to start offering the next generation service in the second half of 2021, experts said.
Analysts expect the sale to generate Rs 40,000 crore to Rs 50,000 crore, with Jio, the only profit-making operator, expected to be the main buyer, followed by Bharti Airtel, and Vi pitching in for only some airwaves, if any.
Industry experts said most of the 700 MHz band – ideal for 4G and for 5G in the future – will likely go unsold at the current rates, even though they are 43% lower than prices in the 2016 sale, when it went completely unsold.
The Department of Telecommunications will issue a Notice Inviting Applications – the final auction document that contains all the rules – this month, telecom minister Ravi Shankar Prasad said at a briefing.
“By winning the right to use spectrum through the auction, incumbent telecom service providers will be able to augment their network capacity,” Prasad added.
The industry said the auction would help cater to the exponential increase in data usage, but lower reserve prices would have provided additional resources for network expansion to the telcos.
“High reserve prices in past auctions have resulted in large amounts of spectrum remaining unsold. We hope the government will take additional measures to boost the financial health of the industry,” SP Kochhar, director general of the Cellular Operators Association of India, said in a statement. COAI represents Airtel, Jio and Vodafone Idea.
For the first time, there will be only three private sector bidders, after consolidation triggered by intense competition and financial stress led to the exit of six telcos, leaving Jio, Airtel and Vi in the sector. Market experts don’t expect any new entrants, given that telcos are still financially stressed with some Rs 7 lakh crore of debt and call and data tariffs among the lowest in the world.
A substantial portion of Jio’s own airwaves and those it shares with Reliance Communications in the 800 MHz band expires in 12 and 14 circles, respectively, starting July 2021. Without these airwaves, Jio’s services in these circles will be impacted, making it imperative that the telco bid for them, analysts said.
Mukesh Ambani-led Jio, with over 406 million subscribers, also needs additional airwaves to cater to surging data demand and a rapidly growing user base that it expects to touch 500 million.
Bharti Airtel and Vi – with about 294 million users and 272 million each – have less expensive airwaves, mostly in the 1800 MHz band, set to expire across eight circles each from July. Both have backup airwaves in most service areas.
“We estimate Jio will pay about Rs 20,000-Rs 30,000 crore and Airtel will spend Rs 10,000-Rs 15,000 crore. Vi, at most, will put in a few thousand crores since it has excess spectrum,” said a senior telecom analyst who did not want to be identified.
The analyst said the main battle will be in the 800 MHz, 1800 MHz and 2300 MHz bands and there may be some takers for 900 MHz.
“The large part of 700 MHz will remain unsold,” the analyst added.
Winning bidders can pay the entire amount upfront or 25% to 50% – depending on the band – and the balance over a maximum of 16 equated annual instalments after a moratorium of two years.
An official said the Cabinet also cleared a proposal to split the upfront payment that phone companies need to make to renew permits for expiring spectrum. This would be a first and would offer marginal financial relief to operators, especially Bharti Airtel and Vi, which have hefty adjusted gross revenue (AGR) dues to pay.
The successful bidders will also have to pay 3% of AGR, excluding wireline services, as spectrum usage charges for airwaves won through this auction.
The telcos must comply with parameters and conditions including those pertaining to the block size for which they can submit bids and spectrum caps, the government said.