With just two telco contenders with cash to splash, India’s spectrum auction lacked lustre

• India’s latest spectrum auction wound up after two days
• Two telcos dominated with Reliance Jio spending most and Vodafone Idea the least
• However, the government expressed itself pleased with the result

India’s spectrum auction finished yesterday after just two days of bidding and is reported to have benefited Indian government coffers with a handy US$10 billion (INR778 billion). However, the 700MHz band spectrum on offer for 5G went unsold. Observers said this was because the reserve price attached to that spectrum was too high. 

The auction saw India’s telcos generally holding back to avoid overpaying, helped by the fact that the number of telco players and bidders has greatly reduced since last decade which had seen intensive competitive bidding, according to Bloomberg. 

However, the Telecom Secretary, Anshu Prakash, said the government was happy with the auction outcome, given the pandemic and other “stress situations” and it had actually collected more than expected. However, he indicated it had sold only 60 per cent of the spectrum offered and admitted that the bids had come in at the reserve price. 

The big spender in the auction was Reliance Jio which bought airwaves worth 571.23 billion rupees ($7.8 billion);  its big rival Bharti Airtel spent $2.6 billion on 355.45MHz of spectrum in sub-GHz, mid- and 2300MHz bands. while Vodafone’s India unit acquired spectrum worth 19.9 billion rupees.

Jio was bidding for spectrum it couldn’t afford to lose since it needed to replenish its spectrum stocks due to current licenses expiring, so bought its airwaves in the 800 MHz, 1800 MHz and 2300 MHz bands. It ended up accounting for 73% of the total auction proceeds

Also, there was no C-band spectrum (sits between 3.4 GHz and 4.2 GHz) on offer in this auction. With 5G due to be launched this year, Airtel and Jio are expected to use DSS (Dynamic Spectrum Sharing) technology to introduce 5G onto their existing 4G spectrum holdings and infrastructure for the time being.

As for the surprising lack of interest in the 700 MHz band, according to Anshu Prakash, “the 5G ecosystem is also developing as it is developing in the mid band 3.3-3.6 GHz. So, there can be a possibility that in the next auction, the 700 MHz band also is used.” However both the big operators plus observers have said that the government should look to reduce its reserve pricing for both the 700 MHZ and 3300-3600 MHz bands before the next sale if it wants to see 700 MHz in particular taken up to boost India’s 5G prospects

If nothing else, the auction shows what can happen to spectrum pricing (and government auctioning power) once the number of competing telcos effectively drops to two. While there are still three telcos in the national running in India, Vodafone Idea hardly made any sort of showing in the auction, buying just 11.8 MHz of airwaves across five circles (Indian telecom zones). 

Indeed, Analysts say the company has been struggling with below par coverage due to its limited capex spend and financial challenges.