India’s largest operators would be likely to abstain from bidding on 700MHz and 5G spectrum if auctions are held this year, according to major analyst groups.
The “big three” of Bharti Airtel, Vodafone India and Idea Cellular - along with major newcomer Reliance Jio Infocomm – are all likely to “selectively augment their existing spectrum portfolio across the 800-2500 MHz bands rather than bid for fresh 700 MHz spectrum”, wrote Morgan Stanley in a note to its clients.
The analyst firm noted that none of the major players appear keen to bid for 700MHz spectrum, and are particularly unlikely to do so if the spectrum’s base price remains at a similar level to the previous auctions held in October 2016. The government of India was advised by the GSMA to lower the reserve price for 700MHz spectrum after it failed to attract any bids.
Former Bharti Airtel CEO Sanjay Kapoor noted that while 700MHz spectrum was indeed required to deliver true 4G speeds, he noted that the “present financial condition of telcos does not justify their bidding for this expensive spectrum in an auction this year at least.”
He added that operators were unlikely to bid for 5G as the feasibility of deploying infrastructure was unclear at this stage. The 5G-ready spectrum requires towers to be very close to each other for reliable voice and data services, as it has poor attenuation. “It’s not known whether it would make business sense for telcos to spend top dollars in putting up innumerable towers very close to each other for 5G services,” said Kapoor.
Senior Analysys Mason advisor Sandip Das agreed, noting that the spread of 5G-compatible infrastructure had only just begun, so serious bidding for the airwaves would be unlikely. He added that there was “no real case” for pushing another auction onto the struggling industry, noting that “relief measures for the telecom industry must take precedence to holding another early auction.”
Ratings agency ICRA agreed that the industry “is not prepared” for a large-scale spectrum auction, adding that the government should wait at least another year. “The telecom industry’s high debt levels coupled with the deterioration in financials raises questions on its capability to participate in the next auction,” said Harsh Jagnani, sector head & vice president, corporate ratings, at ICRA.
Operators in India already face massive debt and fierce competition, so there is little appetite for a fresh auction for 4G and 5G spectrum. The Indian regulator TRAI has opened a consultation, inviting feedback from operators on when auctions should be held and how the spectrum should be valued.
The COAI (Cellular Operators Association of India) represents most of the country’s largest operators. Its Director General Rajan Mathews said: “The government must not rush to auction spectrum this year and instead, should allow the market to settle down in the wake of recent M&As.” He noted that operators would be better placed to consider spectrum acquisition after they had combined their networks.