June spectrum auction: Jio may spend Rs 12,000 crore, Airtel Rs 8,000 crore

Reliance Jio is expected to spend up to Rs 12,000 crore to acquire spectrum in the upcoming auction, whereas Bharti Airtel’s spending is seen below Rs 8,000 crore. Vodafone Idea may spend around Rs 1,000 crore, according to analysts.

The spectrum auctions are scheduled to begin on June 6.

Jio is once again expected to lead the auction as the telecom operator will be looking to increase its spectrum holding in some circles in the 800 MHz band. The company may also increase its holdings in the 3300 MHz band to 130 MHz across all circles, analysts said.

The amount, which Jio is expected to spend, would be four times its earnest money deposit (EMD) of Rs 3,000 crore. Trends in previous auctions show the company has spent 2-6 times of its EMD. 

Before telcos deposited the EMDs, analysts had estimated Jio’s participation to be limited, as the company had no spectrum up for renewal and had already acquired a huge chunk of 5G spectrum in the last auction.

“We expect spectrum to be sold near reserve prices and estimate demand to be limited at $0.5-2.5 billion (`4,000-20,000 crore) — the lowest since the auctions in 2013, given the low EMDs submitted by telcos,” brokerage house Jefferies said in a note.

A total of 10,523.15 MHz spectrum — across the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz and 26 GHz bands — worth Rs 96,317.65 crore will be up for grabs.

Bharti Airtel and Vodafone Idea, which will be bidding for renewing the spectrum, have deposited EMDs of Rs 1,050 crore and Rs 300 crore, respectively.

For Bharti Airtel, 42 MHz of spectrum in the 1800 MHz and 900 MHz bands is coming up for renewal in six circles. At reserve prices, this would result in a spending of Rs 3,800 crore.

“Although Bharti has de-risked its operations by acquiring spectrum in 900/1800MHz bands in previous auctions, we still expect it to renew the bulk of its spectrum in these markets to protect/increase its market share. It may also bid in certain circles to increase its holding in 800MHz/1800MHz bands to 10-15 MHz,” Jefferies said. 

Earlier, Jefferies had estimated that Airtel could lead the spectrum auction with a maximum spend of Rs 12,300 crore. 

Analysts said the company could spend a maximum Rs 7,900 crore, as per the previous auctions, the company has spent 4-8 times of the EMD.

Vodafone Idea, which has renewal for 12 MHz of spectrum in the 1800 MHz and 900 MHz bands in two circles, may not renew its spectrum in the 1800 MHz band as it has ample spectrum, analysts said.

In this auction, the company’s spending is expected to be 1-3 times of its EMD against 4-9 times seen in the past, analysts said.

“We assume the upcoming spectrum auction’s success will be limited to renewals, else operators have sufficient spectrum quantities across bands to offer 4G and 5G services,” brokerage house ICICI Securities said in a recent note.

Axis Capital said, “Telcos had aggressively bid for and acquired spectrum for 5G in 2022. Network utilisation remains low given 5G penetration is just 20% for Bharti/Jio, VIL has not even launched”.

The government is not expecting anything beyond Rs 10,000 crore, according to officials.