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Tuesday, July 23, 2024

Telecom spectrum auctions complete, focus now on pending tariff increases: Analysts

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In Short:

Telcos are expected to manage their payout from the spectrum auction. Analysts are now focusing on imminent tariff hikes after the auction concluded. Vodafone Idea’s high spend on spectrum and Jio’s low spending surprised analysts. The government will receive Rs 1,100 crore annually for 20 years. Bharti Airtel bid the most in the auction, followed by Vodafone Idea and Jio.Only a small amount of the spectrum on offer was sold.


Telcos’ Spectrum Auction Payout Manageable, Analysts Say

A cross-section of analysts revealed that telcos’ payout in the muted spectrum auction is likely to be manageable. With the bidding process concluded, the focus is now shifting towards upcoming tariff hikes.

Analysts’ Perspectives

Multiple reports from IIFL Securities, JP Morgan, and Kotak Institutional Equities highlighted key insights post the spectrum auction. They emphasized Vodafone Idea’s surprising purchase of Rs 3,510.4 crore worth of spectrum and pointed out Jio’s muted spending of Rs 973.62 crore, despite having the highest earnest money deposit.

According to IIFL Securities, JP Morgan, and Kotak, the focus now turns towards tariff hikes following the conclusion of the spectrum auction.

JP Morgan mentioned that the runway for tariff actions is cleared, with expectations of tariff hikes in the coming days.

Payment Options and Financial Implications

Based on the government’s relaxed payment option, annual receipts are estimated at Rs 1,100 crore for 20 years starting from FY25. Analysts noted that the payout by companies, if opting for the relaxed payment option, is manageable.

CLSA suggested that the competitive dynamics between the three operators are unlikely to change significantly post the auction.

Operator Performance in the Auction

Bharti Airtel emerged as the biggest bidder in the spectrum auction, securing about 60% of the spectrum’s value placed by the government. Reliance Jio and Vodafone Idea also made significant spectrum acquisitions.

Bharti Airtel bid and won airwaves worth Rs 6,856.76 crore, Reliance Jio secured spectrum worth Rs 973.62 crore, and Vodafone Idea acquired spectrum valued at Rs 3,510.4 crore.

In total, 141.4 MHz of radio waves were sold for Rs 11,340.78 crore in the auction.

Conclusion

The spectrum auction, though muted compared to previous events, saw active participation from major telecom operators. The focus now shifts to tariff hikes and operational strategies in the evolving telecom landscape.

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