Airtel, Vodafone, Idea to Expand 3G Footprint via 900MHz Spectrum if Reliance Jio Skips 2015 Spectrum Auction

In our view, operators will look to expand their 3G footprint wherever possible in the forthcoming 900MHz Spectrum Auction.

The key factor here would be to check if the operator already holds 3G spectrum in the 2100Mhz band. If so, their incentive to bid for 900Mhz could be lower. The TRAI recommendations suggest that DoT should auction the remaining 60Mhz (paired) of spectrum in the 2100Mhz frequency. This should help in creating visibility around 3G services across operators. However, we assume that this is not happening in the immediate foreseeable Feb-2015 Auctions.

With the additional blocks of spectrum available through BSNL, we expect renewals for the top-three to take place successfully. Specifically, we think that Reliance communications’ renewal in Madhya Pradesh and West Bengal could be at risk

Why Reliance Jio is likely to Avoid 900MHz Spectrum Auction ?
We expect Reliance Jio will not participate in the 900Mhz bidding, since their modus operandi has been to keep the overall spectrum cost low. This was visible in the Feb-14 auctions where Jio did not win any 900Mhz spectrum in the metro circles. Instead we expect Jio to use this opportunity to win spectrum in the 1800Mhz to complete their voice offering through 4G (FD-LTE) as they did in the last auction.

How Will Airtel, Vodafone and Idea Cellular Bid in 900Mhz Spectrum Auction of 2015 ?
With the additional blocks of spectrum available through BSNL, we expect renewals for the top-three to take place successfully. Specifically, we think that Reliance communications’ renewal in Madhya Pradesh and West Bengal could be at risk.

We expect Vodafone and Airtel to be the biggest beneficiaries, with additional blocks of 5 MHz across five circles and three circles respectively unless Mukesh Ambani significantly influences the Narendra Modi led Government to checkmate the rise of Airtel & Vodafone by blocking to free BSNL spectrum. We expect Idea to win an additional block of 5 MHz in one state only.

Likely 3G Footprint in India After 2015 900MHz Spectrum Auction
circle-additional-3g-footprint

Smaller operators [Aircel, Tata DoCoMo, etc] do not have the necessary balance sheet strength to outbid the top three operators. Unless operators such as Uninor and MTS get additional funding from the parent, it seems unlikely that they will look to expand spectrum holding in the upcoming auctions.

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