India's private carriers, Reliance Jio, Bharti Airtel and Vodafone Idea (Vi), commenced bidding on Tuesday as the country's second 5G spectrum auction began.
"To enhance existing telecom services and ensure service continuity, the government will hold the spectrum auction on Tuesday, 25 June 2024. This aligns with the government's commitment to provide affordable, state-of-the-art high-quality telecom services to all citizens," the government stated on Tuesday.
The statement also mentioned that three bidders, Bharti Airtel, Vodafone Idea and Reliance Jio Infocomm, are participating in the auction.
This time, the 5G spectrum in eight bands—800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3.3 GHz and 26 GHz—valued at approximately Rs 96,238.45 crore at reserve prices, is up for sale. Unlike the previous 5G auction in July 2022, the costly sub-GHz spectrum in the 600 MHz and 700 MHz bands is not available this time.
On Tuesday morning, Airtel's shares rose by 0.4 per cent to Rs 1,424.80, while Vi's shares remained flat at Rs 17.26 on the BSE. Reliance Industries' stock, the parent company of telecom market leader Reliance Jio, increased by 0.3 per cent to Rs 2,890.85.
Spectrum will be assigned for 20 years and successful bidders will be allowed to make payments in 20 equal annual instalments, with the NPV (net present value) protected at an interest rate of 8.65 per cent.
"Spectrum acquired through this auction can be surrendered after a minimum period of 10 years. There will be no Spectrum Usage Charges (SUC) for Spectrum acquired in this auction," the statement added. "Successful bidders are not required to submit a Financial Bank Guarantee (FBG) or Performance Bank Guarantee (PBG)."
Analysts predict this auction to be low-key, with Airtel and Vi likely focusing on specific bands (900 MHz, 1800 MHz) in markets where they face spectrum renewals.
Some industry experts believe Jio might largely abstain, as it does not have any imminent airwave renewals. However, others suggest Jio may enhance its holdings in the 800 MHz and 1800 MHz bands in certain markets.
Given these circumstances, most analysts expect the current 5G auction to conclude within a day or a day-and-a-half at most.
Industry analysts estimate that the government will collect a modest Rs 1,200 crore in the first year from this sale, as they expect Airtel, Jio and Vi to collectively purchase only around Rs 12,500 crore worth of 5G airwaves—about 13 per cent of the Rs 96,320 crore of airwaves on offer. Telcos have the option to pay the entire sum upfront or in instalments.
The subdued bidding prospects were evident in the modest earnest money deposits (EMDs)—ranging from Rs 300 crore to Rs 3,000 crore—submitted by the three telcos, which are the lowest since the 2014 auction and almost 79-86 per cent lower than the submissions in the previous 5G auction of 2022. EMDs reflect a telco’s bidding strategy and spectrum purchasing capacity.
For the current 5G spectrum auction, Jio, Airtel and Vi submitted EMDs of Rs 3,000 crore, Rs 1,050 crore and Rs 300 crore respectively. This is significantly lower than the Rs 14,000 crore, Rs 5,500 crore and Rs 2,200 crore EMD submissions by Jio, Airtel and Vi respectively in the last 5G sale of 2022.
