News
Network congestion and arrival of Reliance Jio will drive auction bidding, but participants will be selective, analyst firm says.
India’s telecoms operators will spend 1 trillion rupees (€13.3 billion) at the country’s upcoming spectrum auction, significantly less than the reserve price approved by the government a fortnight ago, a local analyst firm has predicted.
Crisil Research expects to see a solid level of participation in the auction, due to be held in the next couple of months, but believes operators will think carefully about the frequencies they bid for.
"Unlike previous auctions, operators this time do not face business continuity issues," said Ajay Srinivasan, director at Crisil Research, in a note published on Monday.
"Yet we expect reasonably healthy participation because incumbents will ramp up their 3G and 4G spectrum holdings ahead of Reliance Jio’s entry," he predicted.
Network congestion will also be a driving factor, Srinivasan said, leading operators to spend around INR1 trillion between them.
The Indian government gave the go-ahead for the auction last month. Should all the available spectrum across the 700 MHz, 800 MHz, 1800 MHz, 2.1 GHz, 2.3 GHz and 2.5 GHz bands sell at the reserve price, the state would raise INR5.44 trillion from the process. But Crisil does not see the auction panning out in that way.
"We expect bidding in 700 MHz to be extremely selective with players preferring the less pricey 1800 MHz," the company said.
It estimates that half the available spectrum in the 1800 MHz and 2.1 GHz bands will be snapped up, alongside most of 800-MHz and 900-MHz airwaves. However, interest in the 2.3-GHz and 2.5-GHz frequencies will be limited, it said.
Private operators will account for around three quarters of the auction spend, with the big three – Bharti Airtel, Vodafone and Idea Cellular – contributing 55%-60% between them, Crisil predicts.
India’s big telcos will together spend around INR1.2 trillion on spectrum and network augmentation this fiscal year and next, Srinivasan said.
"With profitability and operational cash flows of the sector predicted to come under pressure with the launch of Reliance Jio’s services, the reliance on external funding is set to increase," he noted.
As such, Crisil sees the big telcos requiring external funding of around INR500 billion to meet their spectrum and network investment needs over the next two years.
