Bharti Airtel is expected to be the top buyer in the upcoming 5G spectrum auction on June 6, despite Reliance Jio having made the highest earnest money deposit (EMD), analysts say.
Airtel plans to increase its holdings in the important 900 MHz band across 12 regions. This move is driven by Airtel’s need to catch up with Jio’s significant sub-GHz spectrum holdings, which are essential for improving rural mobile broadband coverage.
Currently, Airtel’s sub-GHz spectrum holdings in the 800 and 900 MHz bands are 176 MHz, much less than Jio’s 445 MHz. Jio holds a nationwide spectrum in the 700 and 800 MHz bands, while Vodafone Idea (Vi) has 141.2 MHz in the 900 MHz band.
Earlier, Airtel’s managing director, Gopal Vittal, mentioned plans to add 25,000 new sites in rural India to expand their 4G network in the coming quarters.
The EMD shows a company’s bidding strategy and how much spectrum it can aim for in the auction. Despite Jio’s higher EMD of ₹3,000 crore, analysts expect Airtel to spend the most in the 2024 auction, driven by its focus on rural expansion and a stronger balance sheet. IIFL estimates Airtel’s spectrum spending to be around ₹10,400 crore, Jio’s at ₹900 crore, and Vi’s at ₹1,200 crore. Jio is expected to buy spectrum in only a few regions, while Vi is likely to renew its 900 MHz spectrum in West Bengal and UP West.
Analysts predict the government will collect about ₹1,200 crore from the auction, as the three companies are expected to buy only about ₹12,500 crore worth of 5G airwaves. This is a small portion of the total ₹96,320 crore worth of spectrum available. The estimate is also based on the expectation that the companies will choose the softest payment option, which spreads payments over 20 years.
Choosing equal annual instalments would mean paying 9.8% of the bid value every year, making it easier for the companies to manage their cash flow. In contrast, a 10% upfront payment option would require them to pay 10.9% of the bid value every year from the third year onward.
Further savings on spectrum usage charges (SUC) are not expected to drive aggressive bidding. Current SUC levels for Jio, Airtel, and Vi are already low at 0.19%, 0.31%, and 0.8% of adjusted gross revenue (AGR) respectively. These charges dropped significantly after the companies bought large amounts of 5G airwaves in the July 2022 auction, benefiting from the zero SUC rule introduced then.
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