NEW DELHI: Reliance Jio has submitted Rs 4,500 crore as its earnest money deposit (EMD) for the spectrum auction, the highest among telecom operators, signaling an aggressive play at next month’s sale and spicing up a contest in which Vodafone, Idea and Reliance Communications face a battle for survival in some circles.
Bharti Airtel, India’s top operator, has deposited Rs 4,336 crore as its EMD, considered an indicator of bidding interest, followed by Idea Cellular with Rs 4,000 crore and Vodafone at Rs 3,700 crore. Tata Teleservices made an unexpectedly strong pitch, submitting Rs 1,500.05 crore, higher than the likes of Reliance Communications (RCom), Uninor and Aircel.
A higher EMD allows an operator to place bids across more circles and spectrum bands, thus indicating the carrier’s intent to pick up a greater quantity of airwaves.
“This has now become too serious a game,” a top official at a leading telcom operator said.
“One can’t be naive to think Jio will only bid to push up prices. They could make a serious play in 800MHz and even in 900MHz for that matter, which is not what many people expect.”
He added that Jio could upgrade its network to suit 900MHz and even 2100MHz if need be at an additional cost of about $1 billion (Rs 6,200 crore), which “isn’t much considering the amount that they are spending overall, their deep pockets and the high stakes involved.”
The EMD, which ranges from 16% to 25% of the reserve price, has to be deposited in the form of a bank guarantee by operators applying to participate. The EMD earns potential bidders points, which are then used to make bids across spectrum bands and service areas.
Any bidder who puts in money in excess of Rs 4,000 crore is expected to bid “aggressively for 900MHz and even 2100MHz spectrum,” a top government official said.
The telecom department (DoT) is auctioning spectrum in 2G bands of 80MHz (which can be used for 4G LTE), 900MHz and 1800MHz, and 3G band of 2100MHz.
The sale, slated to start on March 4, will pit the biggest business houses in India — Reliance Industries headed by Mukesh Ambani, Reliance Group led by his younger brother Anil Ambani, the Aditya Birla Group, the Bharti Group, chaired by Sunil Mittal, as well as the Tata Group — against each other.
Aditya Birla Group’s Idea and Anil Ambani’s RCom, along with the Indian unit of British telecom major Vodafone Group, face the biggest challenges as their permits expire over 2015-16 in certain circles where they hold airwaves in the premium 900MHz band. Unless they win back their spectrum, they will have to close their businesses in those service areas as they don’t have alternative airwaves to fall back upon.
Permits in six of Bharti Airtel’s circles are also coming up for renewal but the carrier has sufficient fallback spectrum in 1800MHz, reducing its risks. However, it would want to win back the more efficient 900MHz airwaves and hence has put in a hefty EMD, say analysts.
The total EMD received by the government was Rs 20,436 crore, the highest ever, the government official said. “This suggests that they will be bidding very aggressively,” which could make retaining airwaves all the more expensive for Vodafone, Idea and RCOM.
While analysts don’t expect Aircel to win much and Uninor to be a fringe player like in the February 2014 sale, the Tatas sprang a surprise with their intent.
The three operators had a negative net worth while applying for the auctions, which means they can only augment their current bandwidth holdings and not buy fresh spectrum in a new circle or band. A person familiar with the matter said the Tatas may want to add to their 3G holdings.
The government hopes to garner at least Rs 80,000 crore from the upcoming auctions, based on the reserve price of all the spectrum up for sale, but many expect it to cross the Rs 1.06 lakh crore raised from the 3G and 4G auctions in 2010, making this the biggest ever auction.
At the floor price, airwaves in the 2,100MHz band or 3G band, will garner at least Rs 17,555 crore and all 2G bands across 800MHz, 900MHz and 1800MHz bands will fetch the government Rs 64,840 crore.
The government plans to sell 380.75MHz of spectrum in three bands — the premium 900MHz band, 1800MHz and 800MHz — besides 5MHz in the 2100MHz band across 17 of the 22 telecom areas.
It has fixed a reserve price of Rs 3,646 crore for pan-India per MHz in the 800MHz band, Rs 3,980 crore for 900MHz band (pan-India excluding Delhi, Mumbai, Kolkata, and J&K), Rs 2,191 crore pan-India (excluding Maharashtra and West Bengal) in the 1800MHz band. For the 2100 MHz band, the price of spectrum per MHz has been fixed at Rs 3,705 crore.
Source: Times of India