Feb auctions for spectrum unlikely to flop, but donít expect a fierce fight

Jan 28 2014, 01:11 IST
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Spectrum in Mumbai and Delhi is expensive so analysts do not expect new operators to bid for it. Spectrum in Mumbai and Delhi is expensive so analysts do not expect new operators to bid for it.
Summary3G auction in April 2010 led to aggressive bidding with spectrum being sold at almost 4x the reserve price

companies come up for renewal from 2015 onwards. Put simply, aggressive bidding in February will translate into higher costs for renewing licences across the country next year onwards.

"Bidding is unlikely to be aggressive despite limited availability of contiguous spectrum as the price discovered will be used for incumbents renewals. This should ensure rational behaviour from their side," wrote Gaurav Malhotra, Arthur Pineda and Jitender Tokas in a Citi Research report.

Analysts also said that concerns surrounding Reliance Jio's entry into the 2G auction leading to irrational bidding are unfounded. Based on discussions with various telecom analysts, from a 4G rollout perspective, a 900-MHz spectrum would not make economic business case as the LTE ecosystem on 900 MHz is not mature. However, the 1,800-MHz LTE ecosystem is mature and could be used for 4G deployment.

"We believe that (between 900 MHz and 1,800 MHz) R-Jio could be better placed if it acquires the 1,800-MHz spectrum. However, in our view, the best spectrum combination for R-Jio is 700 MHz/2,300 MHz as the 700-MHz ecosystem is mature, unlike 900; and 700 MHz helps in indoor coverage, unlike 1,800," said Sachin Salgaonkar in a Goldman Sachs report.

In 900 MHz, however, incumbents whose licences are expiring in 2014 could be aggressive bidders. These include Bharti Airtel, Vodafone and Idea. They could bid for at least 5 MHz in 900 MHz in those circles and the balance could reallocate to 1,800 MHz. Spectrum in Mumbai and Delhi is expensive so analysts do not expect new operators to bid for it.

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