Rs 96,000-crore Spectrum Auction Of 5G Airwaves To Begin On Tuesday

India's latest auction of 5G airwaves worth over Rs 96,000 crore is set to commence on Tuesday. However, unlike the last sale in 2022, which saw the government earn a record Rs 1.5 lakh crore, this time the exercise is expected to be more subdued, according to a leading media house.

It is suggested that the upcoming airwaves sale is likely to be low-key as Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) already have sufficient 5G airwave holdings and 5G adoption remains low due to the absence of consumer-centric use cases for the masses.

Analysts anticipate that the three telecom firms might collectively purchase around Rs 12,500 crore worth of spectrum, which is about 13 per cent of the Rs 96,320 crore worth of airwaves on offer. Bharti Airtel and Vodafone Idea are expected to only renew their holdings in specific bands or acquire a minimal amount of additional airwaves, according to analysts.

Reliance Jio does not have any renewals pending but may buy some spectrum in the 1800 MHz band to strengthen its holdings.

The expectations of muted bidding in the auction are underscored by the modest earnest money deposits (EMDs) — in the Rs 300-3,000 crore range — submitted by the telcos. These are the lowest since the 2014 sale and almost 79-86 per cent lower than the submissions in the previous 5G auction of 2022.

Jio has submitted a Rs 3,000 crore EMD for the upcoming sale, which is nearly three times that of Bharti Airtel and ten times that of Vodafone Idea. Some industry observers believe the market leader may attempt to secure airwaves, especially in circles where rivals need to renew permits to continue offering seamless services, raising the possibility of some bidding wars.

In the last 5G auction in 2022, Airtel had to renew airwaves in UP (East) but faced a bidding war with both Jio and Vodafone Idea for the 1800 MHz band, which drove the winning price to 76 per cent higher than the base price. However, apart from select circles, there is not expected to be much interest from the telecom firms.

5G airwaves in eight bands — 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3.3 GHz and 26 GHz will be on sale.

The telcos have the option to pay the entire amount upfront or in instalments. If telcos choose the instalment route, the government is likely to collect a modest Rs 1,200 crore in the first year from the upcoming sale.  

Telcos may opt to pay the entire amount upfront to save on interest costs. The interest cost for deferred payments is higher for the upcoming auction compared to the last sale. For the 2022 auction, the interest rate was 7.2 per cent, while for the upcoming auction, the rate has been set at 8.65 per cent.

Bharti Airtel recently cleared its past spectrum auction dues to save on interest costs.

Analysts expect Airtel to be the biggest spender in the upcoming sale. The company faces renewals in six circles — Assam, Bihar, J&K, Orissa, UP East and West Bengal. Vodafone Idea is expected to renew its spectrum holdings in West Bengal and UP West.