In the next couple of years, the Government of India must conduct as many as three auctions to ensure smooth functioning of the beleaguered Indian Telecommunications sector. 900 MHz spectrum relating to renewals in 2015 and 2016 in 18 circles along with the remaining 1800 MHz of spectrum. Fresh spectrum sale in 800 MHz as the TRAI has given its recommendations. And finally some fresh spectrum sale in 2100 MHz (for 3G).
The key event is the renewal auction. In the 900Mhz, Idea Cellular has nine of its most profitable circles coming up for auction while Airtel has six circles and Vodafone seven circles coming up for auctions.
The 2100 MHz band of spectrum globally is well recognized for its 3G deployment, but with Indian operators having being sold 1800 MHz of spectrum, which can also be used to deploy 4G FDD, we think 2100 MHz would receive a relatively poor response from operators. Idea in Karnataka and Delhi, and Airtel in Punjab and in Orissa could be selective buyers.
The 800 MHz of auction would also largely cater to demand from CDMA operators like Reliance Communications, Tata and Siestma. TRAI issued reserve price recommendations for 800MHZ spectrum auctions, which are largely held by operators like Rcom, Tata and Sistema Shyam(MTS). Tata DoCoMo had surrendered its spectrum holding beyond 3.75 MHz in Delhi and Mumbai and beyond 2.5 MHz in other LSAs. Currently, the operators own a total of 236.25MHz in the band. Additional 141.25MHz is available. TRAI has recommended reserve price of Rs26.85bn per MHz. In the current auction, the 1800MHz band market discovered price was Rs22.7bn per MHz. As per the TRAI recommendations, this spectrum can be used for the LTE FDD network as well. 800Mhz can be added with 1800MHz for LTE FDD. However, most of the operators have already acquired 1800MHz in the recent auctions, so, in our view, they are already poised. MTS India could be one of the buyers, we believe. There is a lower probability of the next auction being a success, we think.
For 700 MHz of auction, we believe the government can make the same available. However, with operators focusing on 900, 1800 and 2300 MHz, we believe this would come for auction much later, 2-3 years from now.