Reliance Jio, Bharti Airtel and Vodafone Idea would need to shell out nearly Rs 50,000 crore combined to renew their expiring spectrum permits in the upcoming spectrum auction beginning March 1, say analysts. However, Bharti Airtel and Vodafone Idea are unlikely to renew most of their airwaves, given their surplus holdings.
The upcoming auction between three Telco’s is expected to be tepid as analysts say it is a buyer’s market and Jio is expected to be the largest contender. “With fewer operators in the system and Vi unlikely to bid much, we do not see aggressive bidding in these auctions. Hence, while telco stocks have generally underperformed the Sensex in the run-up to auctions (on fear of increasing leverage), we do not anticipate the same this time around,” said Morgan Stanley in its report.
Another brokerage firm-Credit Suisse expects Bharti Airtel to spend about Rs 15,000 crore and rival Jio to pay Rs 24,000 crore to buy airwaves. However in case of Jio, the spectrum purchased would be renewal of 44MHz of its airwaves which was bought from Reliance Communications (RCom). The Mukesh Ambani owned telco will also buy 55MHz of spectrum currently owned by RCom, in the auctions.
Rival Airtel on the other hand has 12 MHz / 47 MHz of spectrum expiring across 900 / 1800 MHz bands and at reserve price, it would cost the second largest telco Rs 6,700 crore as upfront payment. But the telco may not go for complete renewal since it has accumulated sufficient spectrum holding via acquisitions
Credit Suisse pegs Jio’s upfront payment to be around Rs 6,000 crore, if it opts for long term funding.
The analysts largely do not expect Vi to go for the bids since it is sitting on excessive spectrum and cannot afford a dent in its coffers.
“VIL’s large spectrum holding, relatively under-utilized network and liquidity issues make us believe that it is unlikely to bid for much spectrum,” said BNP Paribas in its report.
In the notice inviting applications (NIA) – the main auction document containing all rules – issued on Wednesday, the telecom department said it would sell over 2,250 MHz of airwaves across seven 4G bands — from 700 MHz to 2500 MHz bands.
The price of spectrum in a debt laden sector, recommended by the telecom regulator and then approved by the telecom department , has been a bone of contention between the government and the telcos.
At reserve price, spectrum worth Rs 3.92 lakh crore are on offer but certain bands like the 700 Mhz will not see takers , on account of its expensive price tag.
“We expect the upcoming auction to be restricted to airwaves coming up for renewal, and we don’t expect the 700MHz spectrum to find bidders,” said ICICI Securities on Thursday.
“In our view, spectrum auction in India has turned into a buyer’s market. We expect minimal competition with operators picking up spectrum that provides best value for money instead of focusing on renewing all their expiring spectrum,” said BNP Paribas.
Telecom Regulatory Authority of India (TRAI) had refused to budge on the price of the airwaves despite industry pleas, which in turn will make this auction a buyer’s market.
