Reliance Jio holds the key to the amount the government will be able to mop up in the 5G spectrum auction, which begins on Tuesday. If the company goes for conservative bidding for the 800 Mhz band, the total mop up by the government, along with the bids of Bharti Airtel and Vodafone Idea, could be as low as Rs 14,000 crore, against spectrum worth Rs 96,000 crore at the reserve price. This would mean that only 14% of the total available spectrum would get sold.
A best case scenario where, Jio bids on the higher side for the 800 Mhz band, will see the government raise, along with bids of Bharti and Vodafone, around Rs 32,000 crore. In this scenario, the outflow of Jio is estimated at around Rs 18,000 crore, while that of Bharti and Vodafone Idea’s estimate is at Rs 11,000 crore and Rs 2,600 crore respectively.
The reason for such a muted show, according to analysts, is that all the three operators are adopting a conservative approach to the auctions, aiming for strategic enhancements rather than extensive expansion. Operators like Bharti and Vodafone Idea are expected to restrict their purchases to airwaves which are due for renewal in some circles.
According to telecom analyst, Parag Kar, “this substantial reduction in spending underscores the strategic focus of operators on optimising existing resources amidst evolving market demands and technological shifts”.
According to him, the potential reallocation of 5G to the 800 Mhz band and 4G to the underdeveloped 700 Mhz ecosystem carries significant risks, including the possibility of losing subscribers unable to afford compatible handsets in a price-sensitive market. Kar said that this strategy might not only yield limited benefits but could also weaken market competitiveness by reducing service uptake among lower-end 4G subscribers.
Even going by the earnest money deposits (EMD) by telecom operators, the government will be able to mop up a maximum of Rs 52,000 crore.
The collective EMD of Jio, Bharti and Vodafone Idea stands at Rs 4,350 crore.
Jio’s EMD is the highest at Rs 3,000 crore — three times that of Bharti Airtel’s Rs 1,050 crore, and 10 times higher than Vodafone Idea’s Rs 300 crore.
The EMD indicates the bidding intensity of the operators concerned and the amount of spectrum they intend to acquire. So, going by it, Jio has the option to spend up to Rs 36,000 crore or 37.4% of the total value of spectrum on sale. Airtel can spend up to 12,500 crore or 13% of the total value of spectrum, whereas Vodafone Idea can spend up to Rs 3,600 crore.
Based on the EMD, Jio has got 21,363 eligibility points, Airtel 7,613 eligibility points, and Vodafone Idea 2,200 points.
The EMD, however, does not mean a bidder has to compulsorily exhaust all its points in the auction.
A total of 10,523.15 Mhz spectrum across 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz, 2300 Mhz, 2500 Mhz, 3300 Mhz and 26 Ghz bands, worth Rs 96,317.65 crore will be put up for auction.
In the last spectrum auction held in July, 2022, Reliance Jio spent Rs 88,078 crore, followed by Bharti Airtel at Rs 43,084 crore, and Vodafone Idea at Rs 18,799 crore.
