5G Spectrum Auction: Major telecom operators Reliance Jio, Bharti Airtel, and Vodafone Idea commenced their bids on Tuesday for the highly anticipated 5G spectrum auction. The government is putting airwaves worth Rs 96,317.65 crore on the block. "In a move to enhance existing telecom services and ensure uninterrupted connectivity, the government will conduct the spectrum auction on Tuesday, June 25, 2024. This is part of our commitment to provide affordable, high-quality telecom services to all citizens," stated the government in a press release.
To prepare bidders for the event, mock auctions were held on June 3, June 13, and June 14, familiarising participants with the e-Auction platform. The auction catalogue was released on June 24 at 09:00 AM to verify bidder data accuracy.
According to a report by Moneycontrol, the government targets to generate about Rs 10,000 crore from this auction, though brokerage estimates suggest the revenue could range from Rs 4,000 crore to Rs 16,600 crore. The 2022 auction had set a record with Rs 1.5 lakh crore raised.
Analysts predict that only about 17 per cent of the spectrum value will be sold, marking the lowest sale since 2014. The spectrum is expected to be sold near reserve prices due to limited demand.
The Department of Telecommunications (DoT) will auction frequencies across multiple bands: 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 2,500 MHz, 3,300 MHz, and 26 GHz. The spectrum bought in this auction will be valid for 20 years, with options for sharing, trading, leasing, and surrendering the spectrum after 10 years.
Operators may choose to pay the full amount upfront to avoid high interest costs, with the current deferred payment interest rate set at 8.65 per cent, compared to 7.2 per cent in the 2022 auction. Payment options include part payments with moratoriums or 20 yearly instalments, with the first instalment due 10 days post-auction. Pre-payment can be made without penalties.
This year's auction excludes the 600 MHz and 700 MHz bands. The DoT has increased reserve prices by 12 percent for the 3,300 MHz band and 8.9 percent for the 26 GHz band. Prices have also risen by 11-14 percent in bands or circles that saw demand in 2022.
Analysts anticipate that Reliance Jio, Bharti Airtel, and Vodafone Idea will collectively spend around Rs 15,000 crore on acquiring 4G and 5G spectrum.
In preparation for the auction, Jio, Airtel, and Vodafone Idea have submitted a combined Rs 4,350 crore as earnest money deposits. Reliance Jio leads with Rs 3,000 crore, Bharti Airtel has deposited Rs 1,050 crore, and Vodafone Idea has put in Rs 300 crore. The telcos can bid three to four times their earnest money deposits.
Airtel is expected to be the largest spender in this auction with an estimated outlay of Rs 10,400 crore. The company aims to strengthen its sub-1GHz holdings and increase its share in the 1800-MHz and 2300-MHz bands. Airtel is also facing renewals for 42 MHz of spectrum in six circles, including Assam, Bihar, J&K, Orissa, UP East, and West Bengal. The Sunil Mittal-led telco recently cleared its past auction dues to reduce interest costs.
Vodafone Idea is anticipated to renew its 900 MHz spectrum in two circles: UP West and Bengal.