Idea, Reliance Jio Infocomm signal tough fight for spectrum

If the earnest money deposited by mobile operators is any indication, bids for spectrum to be auctioned in early March are likely to be aggressive and the impact on operators, analysts say, could be deleterious. The government, however, is expecting to rake in over R1 lakh crore, making it the country’s biggest ever spectrum sale.

The EMD or the amount operators must deposit in the form of bank guarantees to enable them to bid shows that bidding for the 800, 900 and 2100 MHz bands could be aggressive and that the top five operators — Bharti Airtel, Vodafone, Idea Cellular, Reliance Jio and Reliance Communications — will slug it out for spectrum.

The EMD varies between 16% and 25% of the reserve price in a circle, which indicates an operator’s likely bidding stance. Of these, Vodafone and RCom appear to have been more conservative while Idea and RJio seem to be going all out to win.

Mukesh Ambani’s RJio has deposited the second-highest EMD of R4,150 crore, signalling tough competition for incumbents Bharti, Vodafone, Idea and RCom, who need to protect their spectrum holdings in the 900 MHz band as their licences are up for renewal. RJio’s EMD makes it clear the company will zero in on 800 MHz across circles in blocks ranging between 3.75 MHz to 5 MHz. Additionally, it will also set its sights on 900 MHz in the available18 circles, thereby competing head-on with the incumbents.

The Sunil Mittal-led Bharti Airtel, which has deposited the third-highest EMD at R4,050 crore, will focus mainly on the 900 MHz and 2100 MHz bands. The company’s strategy seems to win back 6.2 MHz spectrum in the 900 MHz band in the six circles where its licences are up for renewal.

In addition, it will attempt to win 5 MHz of 900 MHz spectrum in other circles. For the 2100 MHz band, which is a 3G band, it will focus on circles where it doesn’t have this spectrum.

Aditya Birla Group’s Idea Cellular, for which the auctions are most crucial as it needs to defend its turf in the highest number of circles (nine) that contribute around 79% of its overall revenues, has understandably deposited the highest EMD at Rs 4,929 crore. Apart from fighting to retain the 900 MHz spectrum in the nine circles, the company will focus on getting 2100 MHz in circles where it doesn’t hold any. Additionally, unlike Bharti and Vodafone, it will also try to bag 800 MHz spectrum across circles.

Vodafone’s strategy seems to be conservative as it has deposited only Rs 3,150 crore. The company’s 900 MHz is up for renewal in seven circles and its objective would be to retain this. Additionally, it is likely to opt for either 900 or 2100 MHz in other circles. Anil Ambani’s RCom’s ambitions appear even more modest — his firm has deposited an EMD of Rs 1,175 crore and will aim to renew spectrum of 900 MHz in seven circles. RCom may also look at either 800 MHz or 2100 MHz in some other circles.

The winners in the 900 MHz and the 800 MHz bands will need to pay 25% of the bid amount within 10 days of the close of auction, while 33% of the winning bid price will be the upfront payment for spectrum in the 1800 MHz band. The rest would need to be paid in 10 equal instalments after a two-year moratorium.

Source – Financial Express


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