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5G spectrum auction worth Rs 96,000 crore set to start on Tuesday

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In Short:

India is set to auction 5G airwaves worth over Rs 96,000 crore, with expectations of low-key bidding. Reliance Jio, Bharti Airtel, and Vodafone Idea have sufficient 5G holdings. Analysts predict around Rs 12,500 crore worth of spectrum to be bought. Earnest money deposits are lower than previous auctions. Telcos may pay upfront or in instalments, with interest costs higher this time. Airtel is expected to be the biggest spender in the sale.

India’s 5G Airwaves Auction Set to Begin

India’s latest auction of 5G airwaves worth over Rs 96,000 crore is set to kick-off Tuesday. However, unlike the last sale in 2022, when the government netted a record Rs 1.5 lakh crore, this time the exercise is expected to be a muted affair, said industry executives and analysts.

Low-key Participation Expected

Industry experts suggest that the upcoming airwaves sale is likely to be low-key as Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) already have adequate 5G airwave holdings, and 5G adoption remains low due to the absence of consumer-centric use cases.

Analysts predict that the three telecom firms could collectively buy around Rs 12,500 crore of spectrum, which is about 13% of the total airwaves on offer.

Market Dynamics

Bharti Airtel and Vodafone Idea are expected to primarily renew their current holdings or make minimal additional airwave purchases, according to analysts.

On the other hand, Reliance Jio, not facing any renewals, may opt to strengthen its spectrum holding by acquiring some in the 1800 MHz band.

Bidding Expectations

The modest earnest money deposits (EMDs) submitted by the telcos, ranging between Rs 300-3,000 crore, reflect the market’s expectations of a muted bidding process. Jio’s EMD of Rs 3,000 crore is significantly higher than those of Bharti Airtel and Vodafone Idea.

The market leader, Jio, may engage in bidding wars especially in circles where rivals have to renew permits, as seen in previous auctions.

5G Airwaves on Sale

The auction will offer airwaves in eight bands including 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3.3 GHz, and 26 GHz.

Payment Options

Telcos have the option to pay the entire amount upfront or in instalments. Choosing the instalment route could see the government collect around Rs 1,200 crore in the first year from the upcoming sale.

Interest costs for deferred payments in this auction are higher compared to the last sale, with an interest rate fixed at 8.65%, prompting some telcos to consider paying the full amount upfront to save on costs.

Expectations from Telcos

Analysts anticipate that Bharti Airtel will be the biggest spender in the auction, with renewals expected in six circles. Vodafone Idea is likely to renew spectrum holdings in specific regions as well.

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