According to a report by IIFL Securities, the upcoming 5G spectrum auctions may witness telcos bidding for only four of the ten bands being put up for auction, with spectrum likely to be sold at the base price. As per the report, Reliance Jio is expected to spend Rs 375 billion, while Bharti Airtel and Vodafone Idea Limited (Vi) is expected to spend Rs 250 billion and Rs 8.50 billion, respectively, in the upcoming spectrum auctions.
Further, the report estimates a total bid value of Rs 710 billion. In case all three telcos (Airtel, Jio and Vi) opt for the option of equal installments over 20 years, the report expects the government to receive Rs 6.20 billion proceeds in financial year 2022-23.
The report by IIFL Securities further notes that the telcos will be giving the expensive 700 MHz band a miss, despite a 40 cent reduction in base prices from before, as they await further reduction. The 700 MHz is the key low-frequency 5G band offering higher indoor coverage and requires fewer towers in rural areas. This band is also key for offering use-cases resulting from network-slicing and standalone 5G. To this end, the report predicts that the telcos will likely use the existing 4G core to offer 5G services in the non-standalone (NSA) configuration in the near term.
With regard to the 3.6 GHz band, which is the mainstream 5G band with more 842 smartphone models supporting it, the report foresees that this band may see a dampened response after the telecom department allowed allocating spectrum directly to enterprises for private captive networks, diluting the potential revenue opportunities for the telcos.
The report predicts Jio and Airtel to bid for a 50 MHz block of the 3.6 GHz band, while Vi to bid for a 20 MHz block. Meanwhile, Jio and Airtel may also increase their holdings in sub-1 GHz airwaves by bidding for the 850 MHz and 900 MHz bands respectively, the report notes.
IIFL securities expect tremendous value for telcos acquiring the 28 GHz spectrum which can be used to offer fixed wireless access (FWA) services where fibre to the home is difficult to roll out. The 2022 5G auctions also come with additional benefits such as significantly flexible payment terms, lower interest rate for NPV preservation versus earlier auctions, and nil SUC. Additionally, the IIFL analysts predicts there will be no bids for 1800, 2100, 2300 and 2500 MHz bands, as supply with telcos in these bands are adequate.
