Vodafone’s Surprise Buy of 2500Mhz Spectrum in Big Spectrum Auction 2016

Telecom Spectrum Auction in IndiaVodafone has primarily focused on enhancing its 4G footprint. With its significant acquisition of spectrum in 2500MHz, 2100MHz, and some in 1800MHz, it has 4G coverage in 17 circles, which cover 91% of its revenues and 94% of mobile‐data revenues. Vodafone has faced capacity issues of late, and this addition was expected; nevertheless, Vodafone’s acquisition in 2500MHz, which does not have the evolved handset ecosystem of 1800MHz or 2100MHz (3G), surprised us.

Airtel’s spending, at Rs 142bn, was significantly higher than expectations. It acquired spectrum largely in 2300MHz, which is an essential capacity band. It has spent Rs 103bn in 15 circles for additional carriers in 3G and 4G bands, significantly upping its capacity. Airtel is clearly keeping in step with Jio, which also has added capacity in the 2300MHz band. The auctions make it clearer that Bharti will match Jio in its entire product offering, which will not only help it to maintain, but also gain revenue market share in the medium‐ to long‐term.

While Jio was expected to spend most in 800MHz and 1800MHz, it surprised us by adding spectrum in 2300MHz. Jio’s operations are still in a nascent stage, and addition of this much spectrum clearly indicates that its strategy is based on churning incumbents’ high‐value customers.

Idea spent close to Rs 128 bn, acquiring spectrum in 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands. Idea has often been criticized for lacking a quality data footprint. It has addressed this concern by buying significant 4G and 3G spectrum, which takes its data footprint pan‐India (almost) and adds significant capacity in leadership circles (like Maharashtra), where it is now well placed to defend its market share. We are a bit surprised by the Idea’s bids in the 2500 MHz band, especially given the lack of a mature device ecosystem; we will have to wait and watch how things evolve here.

Zero bids in the premium 700 MHz band, as expected. It will be interesting to see how much lower, reserve prices for this band are set in the next round of auctions. No bids in 900 MHz bands as well.

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