Vodafone India and Idea Cellular are likely to be the most aggressive buyers in the upcoming mega spectrum sale and are tipped to collectively put in nearly $4.5 billion (Rs 30,600 crore) of bids to primarily corner 4G airwaves as they lag way behind Bharti Airtel and Reliance Jio Infocomm on this score, said industry experts and analysts.
Second-largest carrier Vodafone India and No. 3 operator Idea Cellular are expected to dish out roughly $3 billion and $1.5 billion, respectively, in maximizing data spectrum holdings in the 1800 MHz and 2100 MHz bands, although analysts suggest the British telco may even cherry pick some 2300 MHz spectrum in the metro markets.
“Vodafone with 4G airwaves in only five markets has a desperate need for data spectrum before Jio launches commercially, and could emerge among the biggest spenders in the next auction,” said an analyst of a leading global brokerage who did not wish to be named. Idea has 4G spectrum in 10 circles, compared with pan-India holdings for Bharti Airtel and Reliance Jio Infocomm.
But industry experts expect the spectrum sale to garner a maximum $10 billion to $12 billion, which would be less than a seventh of the $83 billion that the government can potentially earn if all airwaves on offer are sold at base price. On Wednesday, the Union Cabinet approved what will be India’s biggest spectrum sale likely in early September, in which the government plans to auction over 2200 MHz of airwaves across 4G bands (700 MHz, 800 MHz, 1800 MHz, 2300 MHz and 2500 MHz bands), and the 2100 MHz 3G band.
Rajiv Sharma, telecom analyst at HSBC, said the government’s auction proceeds target is ambitious and “based on unrealistic expectations” as it expects to raise a whopping $83 billion, which is 2.8 times the telecom sector’s present revenues. More so, he said, since the industry is already reeling under an average net debt to Ebitda ratio of 4x.
Brokerage HSBC expects a lot of the spectrum to remain unsold since 70 per cent of the planned auction receipts are proposed to be driven by take-up in the 700 MHz band.
“None of the existing incumbent carriers have the balance sheet to bid for pan-India 700 MHz spectrum at current prices, and we believe a lot of 4G spectrum might remain unsold in the 700 MHz, 2300 MHz and 2500 MHz bands,” said Sharma. “We see good demand for 1800 MHz, selective demand for 2100 and 700,” he added. “Ecosystem for 700 MHz band from an Indian context could be at least 3-4 years away.”
Analysts, however, aren’t ruling out the chances of No. 1 carrier, Bharti Airtel spending a decent sum in selectively buying some 700 MHz spectrum in high subscriber density markets such as Bihar, Rajasthan, UP-East, UP-West and West Bengal, especially since the base price of these premium 4G airwaves is lower than that of 900 MHz spectrum in some of these circles.