5G Auction: Jio, Airtel, Vodafone Idea & Adani Ready War Chest

5G Auction: Jio, Airtel, Voda Idea & Adani Ready War Chest For INR 1.9 Lakh Cr Bidding

SUMMARY

Reliance Jio, Airtel, Vi and Adani can bid up to 9X of their deposits; thus bidding INR 1.26 Lakh Cr, INR 49,500 Cr, INR 19,800 Cr and INR 900 Cr, respectively

With Vi’s continuing financial struggles, the telecom company is not expected to spend much during the auction

While Reliance Jio is looking at the mid-range spectrum for mass consumption, Adani’s INR 100 Cr deposit is likely for the high-range spectrum for private use

The auction for the much-awaited 5G spectrum will begin on Tuesday (July 26, 2022) and a total of 72 GHz of the spectrum, with a validity period of 20 years, will be put on auction.

At the base price, the spectrum is valued at INR 4.3 Lakh Cr. Reliance Jio, Bharti Airtel, Vodafone Idea (Vi) and Adani Group will compete with each other during the auction.

As per reports, the four players have already deposited INR 21,800 Cr, with Mukesh Ambani’s Reliance Jio depositing around 65% of it (INR 14,000 Cr). Adani Group, the first-time entrant in the telecom sector, has put in a notional INR 100 Cr, while Bharti Airtel and Vi have deposited INR 5,500 Cr and INR 2,200 Cr, respectively.

Since a telecom operator can spend up to 9X the deposit in the auction, the potential spend by Jio, Airtel, Vi and Adani is likely to be INR 1.26 Lakh Cr, INR 49,500 Cr, INR 19,800 Cr and INR 900 Cr, respectively. Thus, according to some experts, with the deposit already in place, the government is likely to earn up to INR 1.95 Lakh Cr from the auction. Others estimate a much lower collection.

	Reliance Jio	Bharti Airtel	Vodafone Idea	Adani
Deposit With Govt	INR 14,000 Cr	INR 5,500 Cr	INR 2,200 Cr	INR 100 Cr
Available Bid Limit	INR 1.26 Lakh Cr	INR 49,500 Cr	INR 19,800 Cr	INR 900 Cr
Deposit For 4G	INR 10,000 Cr	INR 3,000 Cr	INR 475 Cr	–
Spectrum Picked	INR 57,122 Cr	INR 18,700 Cr	INR 1,993 Cr	–

The 5G Outlook

With Vi’s continuing financial struggles, the telecom company is not expected to spend much during the auction. Vi already has a debt of INR 1.98 Lakh Cr, of which payments of INR 8,160 Cr are due in the financial year 2022-23 (FY23).

However, in a relief to telecom operators, the government has said that it will only charge one-time spectrum fees, and there will be no spectrum usage charge (SUC) on any of the spectrum acquired in the 5G spectrum auction.

The government has also removed the mandatory upfront payment requirement and allowed payments in annual instalments for 20 years. This will ensure that the funds of the companies will not be stuck as soon as they acquire the 5G spectrum.

As visible by Jio’s deposit for the auction, the 4G pioneer is seriously eyeing a substantial portion of the 700 MHz bandwidth, leaving very little for others.

Experts have said that with a deposit of INR 100 Cr, Adani Group seems to be eyeing the higher bands to build private networks. The Group has said that it doesn’t want to be in the ‘consumer mobility space’, and it will use the 5G spectrum to provide private network solutions at airports, ports and for power generation, among others.

The government will auction a total of 72 GHz of spectrum in various low (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz), mid (3300 MHz) and high (26 GHz) frequency bands.

With Jio’s hold on a considerable sub-GHz spectrum, the government will have to make the 700 MHz band relevant, considering telcos already hold over 670 MHz spectrum in the 4G band. The 700 MHz spectrum provides a slightly better speed, with the signal expected to be better than 4G even in regions far away from the cell towers.

The government had earned INR 78,000 Cr from the auction of the 4G spectrum, and it remains to be seen how much funds it gets from the 5G spectrum auction.