800Mhz Spectrum Auction Turns into Battleground – Reliance Jio Vs Incumbents

Heavy Demand for 800Mhz Spectrum BandOngoing spectrum auctions are seeing a good contest for 800 spectrum band (83% premium to the reserve price). I had earlier explained on why it makes strategic sense for Reliance Jio to acquire 800Mhz Spectrum and also added that incumbents could add in one or two circle.

The competitive intensity in the ongoing auctions suggests that even incumbent operators are attempting to acquire this spectrum. The key reasons behind this demand are: (a) 800MHz is being used in Korea (among the largest market for 4G) for LTE; (b) further, there is not enough sub 1GHz spectrum and release of spectrum in 700MHz band may take few years.

Not much is being auctioned in 800 in the ongoing auctions. Good pricing for 800 may see the government
releasing more spectrum in this band (the regulator had suggested that state-owned telcos have surplus spectrum,
however, there are very few blocks of contiguous spectrum blocks available). Furthermore, the regulator allows existing CDMA players to liberalize existing spectrum holdings by the payment of the current market price (post which can be used for 4G). That said, for meaningful spectrum to be available for 4G approval to spectrum trading will be critical, in my view.

800Mhz Spectrum Clearing Prices vs Reserve Prices800mhz spectrum prices
Clearly evident from the chart above that 800Mhz Spectrum auction is no cake walk for Reliance Jio Infocomm as provisional winning prices is rising beyond the reserve price and the auction continues.

Airtel is likely to improve its data spectrum holdings in the upcoming auctions (mostly in 900Mhz band and selectively in 800 band). If competition adds 800, this could be negative but adding pan India 5MHz footprints in 800 will not be immediate (may take 12 to 18 months) and will not be cheap in any case. If Airtel fails to renew 900MHz spectrum in existing circles, as 900 circles are key to Airtel’s market leadership, and losing good-quality 900MHz spectrum could result in subscriber churn and higher capex. Such a scenario would strengthen competition as well.