900MHz Spectrum Renewal for RCom – Incumbents to Bid in Auction

Reliance GSM Spectrum in North EastAnil Ambani managed Reliance Communications’ 900MHz GSM spectrum in seven circles (Assam, Bihar, HP, MP, North East, Odisha and West Bengal) expires in Dec 2015; RCom would need to renew its current spectrum holdings in these circles in an Auction sometime between now and Dec 2015. RCom holds 6.2 MHz of 900 band spectrum in five of these seven circles and 4.4 MHz in this band in the other two; it also holds 1.8 MHz of 1800 band spectrum in three of the seven circles.

When the Spectrum is up for renewal by means of Auction, we think at least one of the GSM incumbents of A-Vo-Id operators lobby to throw their hat in the ring. This is especially true for Global Telecom Giant, Vodafone, which has carved out a strong market share for itself in these circles despite being a late entrant (except in West Bengal). Vodafone has inched its way up to a 9-19% market share in these new circles and is now a strong #2 or #3 in some of these.

Voice and 3G on 900MHz Spectrum with Better Efficiency – A Double Edged Sword
Liberalized 900 MHz spectrum is an extremely efficient band for 3G rollout and we may see the incumbents bid aggressively for this spectrum to complete their 3G spectrum footprint. Vodafone would want to grab 900 MHz spectrum in some of these circles in a bid to compete stronger versus Airtel. Idea will selectively attempt to win 900 MHz spectrum in some of these circles like Bihar, HP and West Bengal either. Airtel does not have 3G (2100 MHz) spectrum in two of these seven circles while Vodafone and Idea have 3G spectrum only in one of these seven circles thus making them to naturally participate in the Auction.

Bigger reason for Anil Ambani to worry is that, these circles despite small in size in the overall industry context, GSM operations in these circles are important for RCom as they contribute roughly 25% of its Wireless Revenue Base. With strong interest from incumbents, clearing prices could push high for 900 MHz spectrum making it a costly affair for Reliance Communications.

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