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Spectrum auction coming soon!Telcos need to wait for 5G spectrum

  •  On 16th Dec’20, the Union Cabinet approved the auction of the 700MHz, 800MHz, 900MHz, 1800MHZ, 2300MHz, and 2500MHz spectrum bands for a validity of 20 years. The auction process may start by the last week of Jan’21 (NIA may be rolled out this month). As a result, the auction could happen before March’21, in line with our expectation.
  • In the upcoming auction, total spectrum of 2251.25MHz would be auctioned with a steep valuation of INR3.9t. As per TRAI’s latest reserve price, the value of the 700MHz spectrum stood at a whopping INR2.3t; the remaining spectrum is valued at INR1.6t.
  • The auction would cater largely to the renewal of expiring spectrum coming up in FY22, along with fresh spectrum in the remaining bands. BHARTI/VIL/RJio would require capex of INR130b/INR83b/INR280b at reserve price to renew their expiring spectrum (see report). Furthermore, telcos would need to furnish additional capex to buy fresh spectrum.
  • Similar to previous auctions, telcos would have the option to pay a 25% upfront price for the 700MHz, 800MHz, and 900MHz bands and a 50% upfront price for the rest of the bands. The remaining amount would be payable in installments over 16 years post a two-year moratorium.
  • The steep pricing of the 700MHz spectrum has been maintained, leaving limited interest among telcos to buy this spectrum at such an exorbitant price.
  • Lastly, the 5G-recommended 3,300–3,600MHz spectrum band is not being offered in the upcoming auction, leaving limited option for telcos to foray into 5G before the next auction.

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