Bharti Airtel, India’s second largest telecom operator, is expected to spend the highest among all operators in the upcoming spectrum auction in May, thereby piping Jio and Vodafone Idea, analysts said.
This is because besides acquiring the spectrum which is up for renewal, Airtel is expected to acquire additional spectrum in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, and 2300 MHz, analysts said. The same will not only help Airtel to boost its market share and up stake in rural areas, but also help it transition to 5G standalone architecture without even waiting for 600 MHz band and the expensive 700 MHz band, analysts said. Besides, Jio’s participation is expected to be limited as the company has no spectrum up for renewal and it has already acquired a huge chunk of 5G spectrum in the last spectrum auctions.
“Bharti Airtel has renewals for 42 MHz of spectrum in 1800 MHz and 900 MHz band in six circles. At reserve prices, this would result in spending of Rs 3,800 crore. Although Bharti has de-risked its operations by acquiring spectrum in 900/1800 MHz bands in previous auctions, we still expect it to renew the bulk of its spectrum in these markets to protect/increase its market share,” Jefferies in a note.
According to Jefferies, Airtel may also bid in certain circles to increase its holding in 800MHz/1800MHz bands to 10-15 MHz and in 2300 MHz band to 40 MHz. This could lead to a maximum spend of Rs 12,300 crore in the auction.
Currently, Airtel has in total 22,027 MHz spectrum in total – which includes 20 MHz in 800 MHz band, 156 MHz in 900 MHz band, 328 MHz in 1800 MHz band, 215 MHz in 2100 MHz band, 790 MHz in 3300 MHz band, and 17,600 MHz in 26 GHz band.
Kotak Institutional Equities said, Airtel could bid for sub-GHz spectrum in Madhya Pradesh, Maharashtra (to complete 10 MHz in 800 band) and in Andhra Pradesh, Gujarat, Karnataka, Rajasthan, Tamil Nadu, Kerala and West Bengal (to reach 5-10 MHz in the 900 band).
Lately, in a bid to fully utilise the potential of 5G, Airtel has talked about trials on the standalone architecture (SA) which works independent of any underlying layer such as 4G network. As a potential spectrum strategy, the company could bank on the 800 and 900 MHz bands to acquire spectrum suitable for 5G SA, and save on costs and time by waiting for 600 MHz band to open, experts said.
“The strategy enables Bharti to secure a 10 MHz block suitable for 5G SA deployments in nearly all regions…by executing this plan Bharti will end up spending just Rs 26,159 crore much less than Rs 39,070 crore if they opted to buy 10 MHz of 600/700 MHz band,” said Parag Kar, former vice-president of government affairs, India and South Asia at Qualcomm.
Kar, who is a telecom sector expert said, for circles – Delhi, Gujarat, Haryana, Kerala, and Mumbai, where Airtel’s foothold could be weaker to transition to 5G SA, Airtel can go for both the 1800 and 2100 MHz frequencies in the upcoming spectrum auction.
“While the financial implications are significant, the outlined expenditure is a strategic investment into Bharti’s long-term infrastructure, poised to enhance network performance, competitiveness, customer experience, and service innovation,” Kar said.
Overall, for a meaningful competition with Jio and have good quality 5G, Airtel would need to acquire spectrum worth Rs 32,500 crore.
It is worth noting that, expectations by analysts are against Airtel’s earlier guidance on spectrum acquisition strategy. In November last year, Bharti Airtel’s managing director and chief executive officer Gopal Vittal said that the company will be spending a lot less on the future spectrum auctions as it does not require additional airwaves.
“We project incremental spectrum liability of Rs 5,100 crore in FY25 for Bharti Airtel. However, we do not rule out the possibility of bidding for other circles/bands given strategy around doubling down on rural roll outs and eventual amount being higher than what we have assumed,” Morgan Stanley said.
Comparatively, Jio has about 26,772 MHz spectrum in total. It exclusively has 220 MHz of 700 MHz band (10 MHz in each 22 circles), 225 MHz of 800 MHz band, 281 MHz of 1800 MHz band, 880 MHz of 2300 MHz band, 2440 MHz of 3300 MHz band, and 22000 MHz of 26 GHz band. Vodafone Idea, on the other hand, has about 8,000 MHz of spectrum in total.
Jefferies said, while Reliance Jio is not expected to have limited participation owing to huge spends in the last 5G auctions, it may increase its spectrum holding in certain circles in the 800MHz band, which could lead to additional spend of Rs 3,700 crore.
For Vodafone Idea, even as the company has 12 MHz spectrum up for renewal in the 1800 MHz and 900 MHz band in two circles. At reserve prices, this would result in spending of Rs 1,500 crore. However, analysts believe that since the company has ample spectrum in renewal circles in 1800MHz band, it may opt not to renew spectrum in the 1800MHz band, but could go for renewal in the 900 MHz band, especially in West Bengal circle.
“This could lower its spend from Rs 1,500 crore for all renewals to Rs 200 crore for just 900 MHz band,” Jefferies said.
The upcoming spectrum auction, which will see airwaves worth over Rs 96,317.65 crore across bands being put up for sale, will start from May 20, according to notice inviting applications (NIA) released by the department of telecommunications (DoT) last week.
Overall, given the 5G rollouts are done and capacity utilisation is now low, the chances of incremental demand for 5G-related frequency bands could be low, analysts said. Infact, the government is not expecting anything beyond Rs 10,000 crore revenue from the auctions, according to officials.