New Delhi: The government mopped up a record over Rs 1.5 lakh crore from India’s first auction of 5G spectrum which ended Monday, with Reliance Jio emerging as the largest bidder.
After 40 rounds over seven straight days, market leader Jio acquired 24,740 MHz of 5G airwaves — which can offer mobile internet speeds 10 times faster than 4G — worth a whopping Rs 88,078 crore, contributing nearly 59% to the central kitty.
Jio’s buys included frequencies in the super-efficient but costly 700 MHz band as well as those in the 1800 MHz band in UP(East). It won 10 MHz of the band in the circle af-ter a bitter fight with Airtel, paying Rs 1,646 crore and taking the price nearly 81% higher than its base rate, said officials in the know.Bharti Airtel, the country’s second-largest telco, bought 19,867.8 MHz of band-width worth Rs 43,084 crore while cash-strapped Vodafone Idea spent Rs 18,799 crore to buy 6,228 MHz of airwaves. New entrant, Adani Data Networks — a unit of the diversified Adani Group — made modest purchases of Rs 212 crore for 400 MHz of spectrum across six cities in only the 26 GHz band this time round, purely for its captive private network needs.
Jio’s surprise buy of the coveted but pricey pan-India airwaves in the 700 MHz band may lend it a competitive advantage over arch-rival Airtel, on 5G coverage quality and may help it gain more top-end customers and revenue market share in the coming months, say analysts.
Bharti Airtel, on its part, said it had followed a strategy of buying the best spectrum as-sets at a substantially lower cost, as compared to competition.
Better than anticipated: Vaishnaw
A company official added that Airtel didn’t need the 700 MHz band given its strong spectrum holdings in the 1800 and 2100 MHz bands. “So for half the price, we are real-ly effectively going to be able to de-liver 100 times capacities.”
He added that by spending Rs 40,000 crore, Airtel would have been able to offer 7-8 Mbps speeds in-doors. “Now you take the 50 million top homes in India, they all have WiFi at 50 or 100 Mbps, so what’s this five Mbps seven Mbps business? So today with our 850 and 900 band, we are anyway able to de-liver deep inside the home at 3-4 Mbps.”
Vodafone Idea (Vi) is likely to be even more prone to customer and revenue share loss-es post-5G deployments by the top two telcos later this year, said analysts.
“Definitely this (auction) result is better than what was anticipated by everybody, all the stakeholders, including the industry and the investors. Everybody was expecting it to be in the Rs 80,000 to Rs 1 lakh crore range. So, this is definitely surprising,” telecom minister Ashwini Vaishnaw told reporters after the end of the sale, which generated Rs 1,50,173 crore.
He added that all auction formalities, including spectrum allocation, will be completed in the next 10-12 days and expects telcos to start 5G service launches in October.
The quantity of spectrum purchased is good enough for covering the entire country, and that the government is hopeful of such a coverage in two to three years, Vaishnaw said. Over this time frame, Vaishnaw expects the industry to in-vest Rs 2-3 lakh crore.
“Jio is committed to offering world-class, affordable 5G and 5G-enabled services. We will provide ser-vices, platforms and solutions that will accelerate India’s digital revo-lution, especially in crucial sectors like education, healthcare, agriculture, manufactur-ing and e-governance,” Akash M Ambani, Chairman, Reliance Jio, said in a statement.
“This spectrum acquisition at the latest auction has been a part of a deliberate strategy to buy the best spectrum assets at a substantially lower relative cost compared to our competition. This will allow us to raise the bar on innovation and address the emerging needs of every discerning customer who de-mands the best experience in India.” said Gopal Vittal, MD & CEO (India & South Asia), Bharti Airtel, in an official statement.
The auction of 5G spectrum, which also offers lag-free connectivity, and can enable bil-lions of connected devices to share data in real-time, was widely expected to last just two days. But it continued for a week, driven largely by intense bidding for 1800 MHz airwaves in the key UP (East) market that resulted in the per unit price of this spectrum jumping to nearly Rs 163 crore a unit compared with the base price of Rs 91 crore. Telcos spent over Rs 10,376 crore on the band.
The bidding competition in the 1800 MHz UP (East) was a capacity game, Vaishnaw said. He was refer-ring to the 1800 MHz band as being good for expanding the capacity of a telco in order to cater to rising data demand. “There was good competition as one operator had 5 MHz and another wanted 5 MHz,” he said.
The Centre garnered its highest ever auction proceeds, mainly on the back of the 700 MHz band – bought only by Jio. The band went unsold in the previous two auctions, but the price was cut by 40% for this sale, from the base price of 2021. It contributed the most – Rs 39,270 crore — to the government kitty this time.
Besides the 700 MHz band, Jio bought most of its airwaves in the coveted C-band, or mid band (3.3-3.67 GHz) and 26 GHz bands to address both coverage and capacity needs of a robust pan-India 5G network that can withstand the challenges of an antici-pated surge in data consumption, post-deployments. Towards this, it has also acquired more spectrum in the 800 MHz 1800 MHz and 2300 MHz bands.
Like Jio, the Sunil Mittal-led telco bought 5G spectrum in the 3.3-3.67 GHz and 26 GHz bands and did selective refills in 900 MHz, 1800 MHz and 2100 MHz frequencies to effectively compete with Jio on pan-India 5G coverage.
“The acquisition of this vast amount of spectrum strapped on to an already industry best existing pool of spectrum will mean that the company does not need to spend any mate-rial sum on spectrum for many years to come. In addition, this spectrum acquisition has enabled Airtel to drastically reduce the payout towards spectrum usage charge (SUC) and eliminate the adverse SUC arbitrage compared to new entrants,” Airtel said in its statement.
“We have successfully acquired mid-band 5G spectrum (3300 MHz band) in our 17 priority circles and mmWave 5G spectrum (26 GHz band) in 16 circles, which will ena-ble us to offer a superior 5G experience to our customers as well as strengthen our en-terprise offerings and provide new opportunities for business growth in the emerging 5G era,” Vodafone Idea said in a statement.
At close of trade on Monday on the BSE, Reliance Industries’ shares rose 2.6% to Rs 2,575.1 while Bharti Airtel gained 2.4% to Rs 694.20. Vodafone Idea’s stock al-so rose 4% to end the day at Rs 9.12. Shares of Adani Enterprises, the promoter company of Adani Data Networks, rose 3.4% to Rs 2,658.90.
“The combination of 700 MHz and C-band (3.3 GHz) spectrum should give Jio an over-all competitive edge vs both Airtel and Vodafone Idea, and the telco could net around 350-500 bps gains in revenue market share (RMS) over the next 2-3 years,” Rohan Dhamija, head (India & Middle East) at Analysys Mason told ET.
He added that going forward, Jio and Airtel’s bigger countrywide airwave holdings in both mid and high bands compared with Vi’s more modest spectrum buys should rapidly increase Jio and Airtel’s overall dominance in the 5G mobile broad-band services space.
In this year’s auction, the government offered a shade over 72 GHz of airwaves for 20 years across 10 5G bands worth Rs 4.3 lakh crore at reserve prices. On of-fer were low-band airwaves (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz), mid band or C-band (3.3-3.67 GHz), and high band (26 GHz).
The final government mop of Rs 1,50,173 crore was nearly double the Rs 77,814 crore mopped up in the March 2021 sale and well over the Rs 1,09,874 crore garnered in the March 2015 auction over 19 days. This time around, the government sold around 71% of the over 72 GHz of airwaves it put on the table. Experts said this was since as much of 86% of airwaves on offer comprised of the low-priced 26 GHz spectrum.
With the exception of the 1800 MHz spectrum in UP (East), all remaining bids were sold at base price.
Vaishnaw said the annual instalment for the industry towards the spectrum bought will be Rs 13,365 crore, including a 7.2% interest.
“Those with a lesser cost of capital may choose to pay more upfront,” he added.
Credit Suisse estimates the government is likely to receive $1.8 billion as upfront pay-ment in FY23 from the 5G auctions, assuming that the bidders use the deferred payment option fully (for 20 years). Ana-lysts said this can be handy as the government, which faces high inflation, can also use these funds to narrow its fiscal deficit.
The government had offered easier payment options for the sale. It had scrapped the re-quirement for winning bidders and allowed payments in equal annual instalments over 20 years to ease the financial outflows of bidders. This time round, the government has also allowed surrender of spectrum after 10 years without any future liabilities. In addi-tion, it has abolished spectrum usage charge (SUC) for air-waves bought in the just con-cluded auction and even scrapped the need for bank guarantees to fur-ther ease the cost of doing business for operators.
The scrapping of the SUC change was one major driver in telcos going in for large quan-tities of the 26 GHz band, say analysts.
“Finally, India has jumped on the 5G bandwagon. In the next 6 to 8 months, consumers will start experiencing 5G services first hand – high-speed mobile broad-band down-loading content in seconds and seamlessly connecting through HD video calls,” Prashant Singhal, EY Global TMT Emerging Markets Leader.