Vodafone Idea, Jio, Bharti Airtel: Rs 96K crore spectrum auction on June 25; Antique Stock Broking shares views

The telecom spectrum auction for eight bands is scheduled for Tuesday, June 25. If one goes by what Antique Stock Broking says, the bidding is unlikely to be a spirited exercise.

The brokerage believes that Bharti Airtel may bid for some of its expiring spectrum worth Rs 3,820 crore while Jio will be selective and will base its bidding on data traffic flow in individual circles. In the case of Vodafone Idea, it would be limited by its EMD deposit and may only bid for the expiring spectrum or the 26 GHz band to lower Spectrum Usage Charges (SUC) cost, Antique Stock Broking said.

"Overall, we do not expect any player to bid aggressively at the auction. We maintain BUY rating on Bharti Airtel with a target price of Rs 1,590 as it is poised to benefit from the tariff hikes in the near future and in FY27 and higher FCF due to declining capex intensity," it said.

A total of 10,523.15 MHz of spectrum worth Rs 96,300 crore as the base prize is up for sale. Like the previous auction round in 2022, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz and 26 GHz bands are up for sale, but 600 MHz and 700 MHz bands have been excluded.

Earnest money deposit (EMD) of Rs 4350 crore has been deposited by three telecom players, which could mean a total bid amount of Rs 52,200 crore based on a maximum limit of 12 times the EMD amount.

The successful bidders will have to make payments within 10 days or will be allowed to make payment in 20 equal annual instalments at an interest rate of 8.65 per cent. Similar to the previous auction, there will be no SUC for spectrum acquired in this auction.

"The reserve price of the expensive 800 MHz and 900 MHz bands remains the same as that of the 2022 auction in all the priority circles. Price of 3300 MHz has been increased by 12 per cent across all the telecom circles. In case of 1800 MHz, price has increased in 10 circles. Price of 2100 MHz has also gone up by 12 per cent in the Delhi, Gujrat and Karnataka circle," Antique said.

For Bharti Airtel, with an EMD of Rs 1,050 crore, maximum bidding potential is Rs 12,600 crore. Renewal of spectrum is due in the 900 and 1800 MHz bands in six circles — Uttar Pradesh (East), Uttar Pradesh (West), West Bengal, Assam, Bihar, Jammu and Kashmir, and Odisha, which can lead to a likely outlay of Rs 3,820 crore at the reserve price and is likely to be bid, Antique said.

With the lowest EMD deposit of only Rs 300 crore, Vodafone Idea's capability to bid is only limited to Rs 3,600 crore. The telecom operator's license is expiring in West Bengal and Uttar Pradesh (West) circles in the 900 MHz and 1800 MHz categories, for which the company may bid for renewal which can lead to a total outlay of Rs 1,480 crore.

"Apart from this, among the high revenue potential states, VI’s bandwidth is relatively less in AP and MP regions in the 900 MHz category. VI may decide to fill such weak areas or may decide to opt for spectrum in the 26 GHz category where there is further scope to reduce SUC charges as a percentage of revenue," Antique said.

Vodafone Idea holds only 5,350 MHz of spectrum in the 26 GHz category compared to 17,600 MHz and 22,000 MHz by Bharti Airtel and Reliance Jio and there remains some scope for acquiring spectrum in this category to drive some savings in SUC charges, it added.

Antique said Jio deposited Rs 3,000 crore and has the potential to bid for maximum spectrum but likely has the least requirement. None of Jio’s spectrum is due for renewal, it noted.

"With the acquisition of 24,740 MHz of spectrum in the last round, Jio’s overall capacity is sufficient. The only potential acquisition opportunity in Jio’s current portfolio could have been in the 700 MHz category which the company is using for offering its SA 5G but has only 10 MHz of bandwidth and an additional 5 MHz would have improved the customer experience. However, the band is not up for sale in the current auction," it noted.