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Jio, Airtel aggressive bids stun industry

Manu Kaushik     March 2, 2021

The spectrum sale is over after the second day of auctions. The Department of Telecommunications (DoT) managed to sell airwaves worth Rs 77,814 crore, which is about 20 per cent of the amount (Rs 3.9 lakh crore) that the department wanted to generate from these auctions. Between three telcos (Reliance Jio, Airtel and Vodafone Idea) who participated in the auctions, 855.7 megahertz (MHz) of airwaves were sold over two days out of 2251.25 MHz that was up for sale.  

While the type of spectrum that telcos picked up was on expected lines, Jio and Airtel stunned the sector with the quantum of spectrum that they acquired.

Jio has acquired 488.35 MHz of airwaves across three bands - 800 MHz, 1800 MHz and 2300 MH. The spectrum, worth Rs 57,122.65 crore, is much higher than the industry estimates. Jio has about 98.8 MHz of spectrum expiring this year (in 800 MHz band) for which it was expected to shell out Rs 23,863.8 crore, as per Credit Suisse estimates in January. The telco will now end up paying much more to bolster its spectrum holding. The telco claims that the recent acquisitions would increase its overall spectrum footprint by 55 per cent to 1717 MHz (uplink+ downlink).

"Jio has revolutionised the digital landscape of India with the country becoming the fastest adopter of Digital Life. We want to ensure that we keep on enhancing experiences, not only for our existing customers, but also for the next 300 million users that will move to digital services. With our increased spectrum footprint, we are ready to further expand the digital footprint in India as well as get ourselves ready for the imminent 5G rollout," said Mukesh Ambani, Chairman, Reliance Industries, in a statement.

Similarly, Airtel has acquired 355.45 MHz of spectrum (worth Rs 18,699 crore) across five bands - 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz. This was much higher than the previous estimates. How?  

It was expected that Airtel would largely renew the spectrum in 900 MHz and 1800 MHz that's due to expire this year, and its total outgo would be around Rs 13,500 crore, as per Morgan Stanley. However, Airtel went a step ahead and acquired spectrum in 800 MHz, 2100 MHz and 2300 MHz as well (in addition to 900 MHz and 1800 MHz) to primarily enhance its deep indoor and in-building coverage (in urban areas) in addition to improving its network capacity. Airtel is planning to serve 90 million additional subscribers because of its larger sub-GHz (800 MHz and 900 MHz) spectrum holdings.

"While the sub-GHz bands will be crucial for 5G technology deployment going forward as well as improvement of indoor coverage, the appetite for 2300 MHz band stems from the rising mobile broadband usage and thus the need for improving network capacity," said Ankit Jain, Assistant Vice President, ICRA, in a note. ICRA is expecting the industry debt levels to rise further to around Rs 5 lakh crore as on March 31, 2022 as a result of these purchases.  

Vodafone, on the other hand, was modest with acquiring airwaves. It has acquired just 11.9 MHz of spectrum for Rs 1,993.4 crore - much lower than the industry estimates. It may be noted that none of the telcos have bid for 700 MHz and 2500 MHz bands which together accounted for roughly 40 per cent of the total airwaves that were up for sale. In 2016 auctions too, 700 MHz band remained unsold for its perceived high prices. Even after slashing the rates from Rs 11,485 crore per MHz in 2016 to Rs 6,568 crore, this band was not touched by any telco recently.

The aggressive bidding by Jio and Airtel negates three popular perceptions to a large extent. Many analysts believed that with the use of more efficient technologies such as LTE and LTE advanced, the spectrum requirements of telcos would come down over a period of time. Then, it was also believed that a shift towards 5G would increase dependency over lower-latency networks like optical fiber which ultimately reduce the need for more spectrum. At last, the large-scale consolidation in the sector over the past three-four years was seen as the new way for telcos to acquire spectrum through non-auction modes.

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