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Crisil predicts $15B spectrum spend from Indian operators

India’s impending spectrum auction is expected to bring in around INR1 trillion ($14.8 billion) from the country’s operators.

Between 55-60% of this total is expected to come from the country’s largest three operators, Bharti Airtel, Vodafone India and Idea Cellular. Between them, these three account for around 75% of India’s market revenue.

India’s cabinet last month backed a record spectrum auction proposal put forward by the country’s regulators. As India’s largest ever auction, initial estimates of the projected revenue were around INR5.6 trillion, significantly higher than the country’s previous auction which raised INR1.1 trillion. However, the newer estimates from research firm Crisil are more grounded, with the firm’s director Ajay Srinivasan noting that “unlike previous auctions, operators this time do not face business continuity issues”.

With market newcomer Reliance Jio debuting its highly anticipated LTE services for public use – although it has not yet implemented a full launch - Srinivasan added that “we expect reasonably healthy participation [in the auction]because incumbents will ramp up their 3G and 4G spectrum holdings ahead of Reliance Jio’s entry”.

Crisil observed that “the aggression of individual operators in bidding will be influenced by their 3G/4G spectrum holdings in key circles and quantum of contiguous spectrum held”, adding that the total spend on airwaves in this fiscal year would be around INR370 billion – falling short of budgetary estimates of INR560 billion, but still a “significant outgo for an industry reeling under INR4 trillion of debt as of March 2016.”

While spectrum in the highly desirable 700MHz is available for bidding, Crisil expects operators to be “selective” about this frequency, with many more likely to bid on “the less pricey 1800MHz”. The firm’s reported noted that around half of the available 1800MHz and 2100MHz and almost all of the available 800MHz and 900MHz blocks would be “lapped up”. The firm cautioned that interest in 2300MHz and 2500MHz “is expected to be limited”.

The key issue faced by operators is network congestion in service areas where data consumption is high. Operators will be keen to acquire further spectrum and boost their capacity in order to compete effectively.

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