The telecom spectrum auction for eight bands is scheduled for June 25. According to Antique Stock Broking, the bidding is unlikely to be vigorous. The brokerage predicts that Bharti Airtel may bid for some of its expiring spectrum valued at Rs 3,820 crore, while Jio will be selective, basing its bids on data traffic flow in individual circles. Vodafone Idea’s participation will likely be limited by its Earnest Money Deposit (EMD) and may focus on expiring spectrum or the 26 GHz band to reduce Spectrum Usage Charges (SUC).
“Overall, we do not expect any player to bid aggressively at the auction. We maintain a BUY rating on Bharti Airtel with a target price of Rs 1,590, as it stands to benefit from upcoming tariff hikes and increased free cash flow due to declining capex intensity,” said Antique Stock Broking.
A total of 10,523.15 MHz of spectrum, with a base price of Rs 96,300 crore, is up for sale. Similar to the 2022 auction, bands available include 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz, and 26 GHz, but 600 MHz and 700 MHz bands have been excluded.
Three telecom players have deposited EMDs totaling Rs 4,350 crore, which could result in a maximum bid amount of Rs 52,200 crore, based on a 12 times EMD limit. Successful bidders must make payments within 10 days or opt for 20 annual installments at an 8.65% interest rate. There will be no SUC for spectrum acquired in this auction.
“The reserve prices for the expensive 800 MHz and 900 MHz bands remain unchanged from the 2022 auction in all priority circles. The price of the 3300 MHz band has increased by 12% across all circles. In 10 circles, the price of the 1800 MHz band has increased, while the price of the 2100 MHz band has risen by 12% in the Delhi, Gujarat, and Karnataka circles,” Antique noted.
Bharti Airtel
Bharti Airtel, with an EMD of Rs 1,050 crore, has a maximum bidding potential of Rs 12,600 crore. Spectrum renewals are due in the 900 MHz and 1800 MHz bands in six circles—Uttar Pradesh (East), Uttar Pradesh (West), West Bengal, Assam, Bihar, Jammu and Kashmir, and Odisha—potentially requiring Rs 3,820 crore at the reserve price.
Vodafone Idea
With the lowest EMD deposit of Rs 300 crore, Vodafone Idea can bid up to Rs 3,600 crore. Its licenses are expiring in West Bengal and Uttar Pradesh (West) in the 900 MHz and 1800 MHz bands, which may necessitate Rs 1,480 crore for renewal. Vodafone Idea might also consider acquiring spectrum in Andhra Pradesh and Madhya Pradesh to bolster its bandwidth in the 900 MHz band or opt for the 26 GHz band to reduce SUC charges.
Vodafone Idea holds 5,350 MHz of spectrum in the 26 GHz band, compared to Bharti Airtel’s 17,600 MHz and Jio’s 22,000 MHz, indicating room for further acquisitions to save on SUC charges.
Reliance Jio
Jio has deposited Rs 3,000 crore, giving it the potential to bid for the maximum spectrum. However, none of Jio’s spectrum is due for renewal. With 24,740 MHz of spectrum acquired in the last round, Jio’s capacity is deemed sufficient. The only potential gap in Jio’s portfolio could have been in the 700 MHz band, used for its SA 5G services, but this band is not up for sale in the current auction.
