Jio, Airtel, Voda Idea may have to cough up Rs 50,000 crore for March spectrum auction

Bharti Airtel, Reliance Jio, and Vodafone Idea will have to pay nearly Rs 50,000 crore (at reserve price) on spectrum renewals in the upcoming spectrum auction.

The exercise is for renewing the entire spectrum that expires in the 800 MHz (megahertz), 900 MHz, and 1,800 MHz bands before March next year. Where Jio will have to cough up more to renew 115 MHz of spectrum in the 1,800 MHz band in 19 circles, Airtel's 57 MHz in the 1,800 MHz band, and Vodafone Idea's 44 MHz in 900 MHz and 1,800 are coming up for renewals too.

Analysts are of the view that these renewals alone would cost Jio around Rs 28,000 crore, Airtel Rs 12,900 crore, and Vodafone Idea Rs 8,300 crore at the reserve price, totalling Rs 49,200 crore. While Jio will have to foot the biggest bill at base price (Rs 28,000 crore), it will also have to procure more spectrum to replace the airwaves it was sharing with RCom, which are also due for expiry next year.

Also Read: Cabinet approves next round of spectrum auction; to help telcos boost network capacity

The cabinet had on Wednesday, December 16, approved the auction of the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2,300 MHz, and 2,500 MHz before March 2021. A total of 2251.25 MHz is going to be offered with a total valuation of ?3.9 lakh crore (at reserve price).

Basis a complex formula arrived at depending on the band that is being bought, telecom operators will have to shell out 25 per cent upfront for the 700, 800, and 900 bands and 50 per cent for spectrum won in the 1,800, 2,100, 2,300, and 2,500 bands, while the rest of the amount will be spread out across 16 yearly installments with a two-year moratorium.

Although the government liberalised the telecom airwaves' usage years ago, which essentially means any spectrum band can be used for any technology (2G, 3G, 4G, or 5G), the global standards of 5G are surfacing around low-frequency bands (sub-1GHz), mid-band (3,300-3,600 MHz), and millimetre bands (26 GHz, 28 GHz, etc.).

Meanwhile, it is believed that Wednesday's spectrum auctions are not for 5G, unless Reliance Jio decides to buy 700 MHz spectrum in order to launch its 5G services next year, as announced by Reliance Industries Ltd (RIL) chairman Mukesh Ambani recently.

Also Read: Race for 5G: Will Jio bid for 700 MHz or give it another miss? 

Experts believe that the chances of incumbents bidding for 700 MHz are minuscule as the price at which 700 MHz has been valued by DoT (department of telecommunications) is exorbitant.

For instance, the value of 700 MHz alone (at a reserve price of Rs 2.3 lakh crore) is 59 per cent of the total airwaves that will be sold. However, given the financial condition of telcos like Airtel and Vodafone Idea, they are likely to give it a miss. Jio, on the other hand, seems to be the only incumbent that can potentially buy the band.

Although the majority of commercial 5G networks around the world use the spectrum in the 3,300-3,800 MHz range, Europe is using 600 MHz for 5G developments in a big way.

Even though Jio reportedly asked the DoT to auction the 700 MHz spectrum recently, it did the same in 2015 but didn't buy anything in 2016 auctions.

With spectrum available in plenty across all bands, telecom companies are unlikely to wallow in aggressive bidding that could jack up prices, adding further to their woes.

Also Read: Telco stalwarts differ on 5G rollout; Ambani says 2021, Mittal says 2-3 years