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Reliance Jio, Airtel and Vodafone to bid aggressively for spectrum

Reliance Jio, Airtel & Vodafone will bid aggressively for airwaves in the 900 MHz band for Delhi, Mumbai and Kolkata circles in auctions.

, ET Bureau|
Last Updated: Sep 11, 2013, 04.00 AM IST|Original: Sep 11, 2013, 04.00 AM IST
Two analysts say Idea could also join the bidding for spectrum in the more efficient but expensive 900 Mhz band.
Two analysts say Idea could also join the bidding for spectrum in the more efficient but expensive 900 Mhz band.
NEW DELHI: Reliance Jio Infocom could join top telecom operators Bharti Airtel and Vodafone India in bidding aggressively for airwaves in the 900 MHz band for the Delhi, Mumbai and Kolkata circles in upcoming auctions, spurred by the telecom regulator’s proposal for a 60% cut in base prices of this efficient bandwidth, say analysts.

Bharti Airtel, Vodafone India and Loop Mobile, who were among the first to be given airwaves in the 900 Mhz band in the three circles when the sector opened up to the private players in 1994, would have to give up the bandwidth when their licences come up for renewal in November 2014.

This would force them to go all out during auctions to win them back, but they could face a stiff contest from players such as Reliance Industries unit Reliance Jio Infocom and Idea Cellular who could be eyeing frequency in the same band, say analysts. They add that Loop, given their financial troubles, was unlikely to enter the contest.

“As 900 MHz band auctions are not on a pan-India basis, the potential for disruptive bidding cannot be completely ruled out,” brokerage HSBC said in a note to clients, indicating aggressive bidding. It flagged Reliance Jio’s participation in bidding for bandwidth in the 900 MHz band as a “key risk” to incumbents.

Two analysts say Idea could also join the bidding for spectrum in the more efficient but expensive 900 Mhz band. Officials at Bharti, Vodafone, Idea declined to comment while Reliance Industries didn’t respond to an emailed query. Loop officials couldn’t be reached for comment.

Bharti Airtel and Vodafone India, the country’s top two mobile phone companies, hold the 900 Mhz spectrum in areas where their licences expire in November 2014. Bharti, India’s largest, and Vodafone, the second largest, each hold 8 MHz of spectrum of the band in Delhi. Bharti holds another 6.2 MHz of the band in Kolkata, while Vodafone holds 8 MHz in Mumbai.

Loop Telecom also holds 8 MHz in the band and its licence also expires in November 2014. If Bharti and Vodafone don’t win back the airwaves, they would have to additionally invest in capital expenditure to shift their subscribers to a different band, thus making it all the more important for them to win back the spectrum.

BK Syngal, former chairman of VSNL and currently consultant at Dua Associates, a telecom consultancy, also expects “aggressive bidding by incumbents whose permits are coming up for renewal next year”. The broad interest for bandwidth is underlined by the fact that it is now liberalised, meaning it can be used to offer any services such as second-, third-, or fourth generation services including high-speed mobile internet, say analysts.

Any auction would depend on a court’s ruling as Vodafone has taken legal action against refarming in the 900 MHz band, which means all operators need to surrender their spectrum during licence renewals and buy them back via auctions.

Vodafone claims it is entitled to an automatic licence and spectrum period extension of another 10 years, as per their contract, while the telecom department contests that claim.

Bids for abundantly available spectrum in the 1800 MHz band, however, won’t likely be as aggressive despite drawing in interest from most operators in the sector, with some saying bids are unlikely to be go much beyond the reserve price.

In a note, brokerage Goldman Sachs said high supply of spectrum, due to the licences and bandwidth cancellations by the Supreme Court in 2012, the high cost of debt and poor balance sheet of most telecom operators with only three of the 11 operators being free cash flow positive would limit aggression.

Mobile phone operators said it was too premature to comment since Trai’s recommendations had come just a day earlier.

With inputs from Kalyan Parbat in Kolkata

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