Reliance Jio likely bid highest for 5G spectrum at Rs 80,100 cr; total bid amount tops Rs 1.45 lakh cr
On the first day of the auction, telecom operators submitted bids totaling Rs 1.45 lakh crore for spectrum in 5G and other bands. According to Telecom Minister Ashwini Vaishnaw, the first-day proceeds exceeded the government’s internal estimates. The amount, however, did not exceed the reserve price in any of the bands. According to ICICI Securities analysts, Spectrum auction day-1 ended on a negative note as operators selected spectrum worth Rs 1.45 lakh crore, indicating a degree of investment indiscipline. Mukesh Ambani’s Reliance Jio is likely to have bid the highest for spectrum worth Rs 80,100 crore, opting for 10MHz airwaves in the 700MHz band. Meanwhile, Bharti Airtel may have bid for Rs 45,000 crore in spectrum and spent 20% more than analysts expected.
According to Telecom Minister Ashwini Vaishnaw, the first-day proceeds exceeded the government’s internal estimates. The amount, however, did not exceed the reserve price in any of the bands. According to him, the amount received is the highest so far, surpassing the Rs 1.09 trillion received in the 2015 auctions. Bids have been received for spectrum in the 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2500MHz, 3300MHz, and 26GHz bands. The base case assumption of ICICI Securities was that the 700MHz band would remain unsold in this auction. “As a result, operators bidding for 700MHz at such high prices are a drag on the industry because it structurally reduces RoIC,” the report said.
According to ICICI Securities analysts, the priority for operators will be to increase RoIC and cashflows, but “spectrum auctions have never been easy.” Spectrum spending by market leaders such as Reliance Jio and Bharti Airtel is significantly higher than expected, necessitating faster industry growth to justify such large investments. “This has not been the case in most geographies around the world, and higher spectrum investment has been seen to reduce RoIC for the industry.” As a result, we would be cautious about increasing our investments in India telecom,” the brokerage said.
According to ICICI Securities, Reliance Jio may have spent Rs 80,100 crore on spectrum acquisition, which is more than twice its base case estimate. According to the analysis, the higher spend is primarily for purchasing 700MHz spectrum band, where it has likely selected 10MHz pan-India for Rs 39300 crore. Sunil Mittal’s Bharti Airtel may have bid for Rs 45,000 crore in spectrum. According to the report, Bharti is likely to have purchased 13MHz spectrum in the 900MHz band in C’ circles, where it had a spectrum gap. “Our base case estimate for the auction was Rs 38,000 crore, and we did not factor in any need in the 1800MHz and 2100MHz bands.” As a result, the spend is 20% higher than expected,” it said.
In the meantime, Vodafone Idea is expected to have spent Rs 18,400 crore on spectrum. “VIL appears to have purchased 50MHz spectrum in the 3300MHz band in 17 circles for Rs 15,200 crore, and 400MHz spectrum in the 26GHz band in 16 circles for Rs 2,600 crore, as expected.” It appears to have purchased 10MHz of spectrum in the 2500MHz band in Andhra Pradesh and Punjab for Rs 650 crore each. VIL’s total spend falls within our base case assumption, according to the brokerage. Adani Data Networks, led by Gautam Adani, is expected to have purchased spectrum worth Rs 900 crore. “It appears that Adani has purchased 26GHz spectrum in 20 circles (with the exception of Delhi and Kolkata), and its total spectrum purchase could be 3350MHz for Rs 900 crore.” Our estimate is provisional and does not include Adani’s entire purchase. “We believe it should have purchased 200MHz spectrum in all circles except Gujarat, where we believe it should have purchased 400MHz,” said the brokerage.
Ashwini Vaishnaw described the auction’s participation as “strong,” with all four bidders participating. According to him, the response demonstrates that the industry has recovered from the difficulties brought on by litigation. “The industry is now being converted to a sunrise industry… Bids of around Rs 1,45,000 crore indicate that the industry is heading in the right direction; new investments will be made, service quality will improve, and new technology will be introduced, according to the minister.
