Big Spectrum Auction – Idea Cellular Reaffirms JIT Strategy+ Rational Bidding

Idea Spectrum Auction StrategyFor the forthcoming Biggest Wireless Spectrum Auction, Idea Cellular has re-iterated its strategy of “Just in Time” [JIT] procurement which it has mastered and executed well over the past few years. To prove this point, in Q2-2016, Idea has exited 3G Roaming Arrangements in six of the seven circles as it rolled out its own network. [Recall, the first 3G Spectrum Auction was conducted in 2010 after the Spectrum Scam and Idea Cellular then decided to skip bidding in non-strategic circles and bought the same in 2014 & 2015 auction]

The spectrum bids will be rational and Idea will adopt a circle-wise approach based on requirements. The focus will be on near-term profitability rather than block up capital in spectrum which will be useful only in the long run. Further, consolidation, spectrum trading / sharing will also create opportunities for acquiring spectrum in an environment of lower competition. Idea has created sufficient data capacity and increased its investments in new circles.

Idea management stated in an Analyst call that spectrum purchase would be discretionary in the upcoming auction and would bid for spectrum only based on its requirement despite the significant increase in supply. Since only a minimal amount of spectrum being put into auction is renewal spectrum (in AP, Maharashtra, Gujarat, Rajasthan and Punjab) and the fact that there is ample spectrum supply, the company does not expect any irrational
spectrum war.

I sometimes wonder if Idea Cellular’s strategy is by the virtue of Parta System which Kumarmangalam Birla, Chairman of Aditya Birla Group has mastered and executed across his conglomerate. Management and Cost / Chartered accountants can throw more light on this 🙂

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