Limited availability of 900MHz spectrum in India could result in operators overbidding for the frequency when it is auctioned in February.
The spectrum is being auctioned following the expiration of the previous 20-year licences. According to investment bank Morgan Stanley, overzealous bidding caused by the dearth of availability is liable to drive up prices – despite the fact that 900MHz spectrum typically enables lower capital expenditure and higher margins.
The premium bandwidth could end up costing four times as much as the 1800MHz bandwidth that was sold in February. If operators do end up lodging bids that exceed the spectrum’s value, call rates would likely be pushed up by as much as 10% in order to cover interest and depreciation costs.
According to Morgan Stanley, Bharti Airtel has the advantage over Idea, RCom and Vodafone India ahead of the auction. In the circles where it will need to renew its 900MHz spectrum, Bharti also offers good coverage via the 1.8GHz and the 2.1GHz frequencies.
The country’s regulator TRAI had recommended expanding next year’s auctions to cover an additional 4 frequency bands, on the grounds that certain bands due to be auctioned – including 800MHz and 2.1GHz – are unlikely to be released in time.
While the Department of Telecoms rejected this suggestion, it did go on to note that it would provide further clarification on spectrum trading and sharing prior to the auction.
