Hefty auction deposits signal intentions of Reliance Jio, Airtel to bid aggressively

Written by Jayati Ghose | New Delhi | Updated: Jan 18 2014, 16:28pm hrs
AirtelAirtel has paid Rs 3,700 crore as earnest money, Vodafone has paid Rs 2,800 crore
The earnest money paid by telcos Bharti Airtel, Vodafone, Reliance Jio and Idea Cellular Ltd while applying for the February auctions reveals that these operators are keen on bidding aggressively for the efficient 900 Mhz spectrum.

While Airtel has paid Rs 3,700 crore as earnest money, Vodafone has paid Rs 2,800 crore. Mukhesh Ambani-promoted-Reliance Jio has paid Rs 2,600 crore and Idea has deposited Rs 1,565 crore.

Companies have to pay earnest money (in the form of a bank guarantee) based on the number of circles and the spectrum band they want to bid for during the auctions. Each circle has a specific deposit requirement and the amount of earnest money paid indicates an operators' level of interest in the auctions.

While the earnest money to bid for Delhi and Mumbai in 900 Mhz is R34.50 crore each, for circles like Andhra Pradesh, Gujarat and Maharashtra in the 1,800 Mhz, an operator would have to pay R7.25 crore each.

Dual-technology operators Tata Teleservices and Reliance Communications have paid around R130 crore and R200 crore, respectively, which analysts say indicates that these companies would bid only in select telecom circles to fill gaps in their 2G network coverage. Meanwhile, Norway's Telenor and Aircel (74% owned by Malaysia's Maxis) have paid R600 crore and R400 crore, respectively, as earnest money.

According to analysts, Bharti and Vodafone would want to retain their entire 16 Mhz holding in the 900 Mhz band (8 Mhz each) in Delhi as they have a high incentive to ensure continuity of operations and to defend their 63% revenue market share. In Mumbai, Idea will want to grab 900 Mhz since it has only 4.4 Mhz of 1,800 Mhz and no 3G spectrum, which poses a threat to its 9.6% revenue market share, experts added.

Analysts also said that Reliance Jio could be planning to use 1,800 Mhz and 900 Mhz to provide plain-vanilla voice and data services to retail subscribers while its broadband spectrum would be allocated for high revenue-generating enterprise customers.

According to the notice inviting application (NIA), given that flexibility has been provided in the auction rules for bidders to be able to bid across service areas in either of the bands (1800 Mhz or 900 Mhz ), applicants should deposit sufficient earnest money so as to enable them to switch between service areas during the course of the auctions.