The great Telecom Spectrum Auction in 1800Mhz and 900Mhz band which has given some clarity and stability to the Telecommunications sector on the policy front has met with mixed views amongst global institutional investors . Here are some views of the key analysts at various research entities,
Jefferries in a Report said,
the duration and aggression shown by operators has taken everyone by surprise. With clarity on prices and quantum of spectrum finally emerging, one can now argue for a positive (or, negative) investment case on the sector – we tilt towards the former.
Goldman Sachs Analysts on Reliance Jio and 900MHz
We believe Bharti/Vodafone getting back their 900 MHz in their renewal circles and Bharti acquiring spectrum in Mumbai is in line with the market and our expectations. R-Jio not acquiring any 900 MHz spectrum is positive for the telcos sector, in our view, otherwise it could have increased competitive intensity and disrupted the existing 900 MHz networks of the incumbents.
Citi Research Wrote,
Rather than looking at incumbents’ outgo as incremental over what needs to be paid at the time of their license renewals, this spectrum (won by incumbents) should be looked (at least partly) as telcos’ front-ending payment for circles coming for renewal in next 1-2 yrs. In this respect, Bharti won in 6/6 circles; Idea in 7/9, and Voda in 3/6. This not only provides greater visibility but the spectrum acquired, being technology neutral, also gives them the flexibility to launch LTE to compete with RJI
Credit Suisse writes Voice Prices Cannot Rise with entry of Reliance Jio,
The just concluded spectrum auctions have resulted in a US$10 bn revenue to the govt., all of which will show up as additional debt for an already leveraged industry. The outcome had some surprises—including a destructive war for 900MHz amongst the top-three players. We do not subscribe to the view that tariffs can continuously go up in the event of entry of a well-capitalised new entrant.
Standard Chartered thinks 4G LTE Data Potential Lead to Price escalation in 1800Mhz band
Despite ample supply at the 14 February auction, prices in 1,800 MHz reached INR 22.7bn/MHz, 29% over the reserve price. Prices for 900 MHz in Mumbai/Delhi Kolkata rose an average 2.3x the 1,800 MHz price. Both prices
were higher than we anticipated. Demand shot up mainly because of (1) incumbents’ eagerness to corner 1,800 MHz for 4G/LTE and de-risk their 900 MHz holdings; (2) R-Jio’s demand for 5.0-6.6 MHz across 14 Metro/A-category circles
Nomura Analyst Sachin Gupta wrote,
Reliance Jio managed to win spectrum in 14 circles on 1800MHz, raising concerns about competition – the incumbents generate around 70% of their revenues from these circles; and 2) near-term cashflows will take more of a hit, especially for IDEA which has more immediate renewals.
Naveen Kulkarni at Phillip Capital said,
While the bidding seems to be stressing the valuation for the telecom companies but we believe the auctions have clearly demonstrated the direction for further consolidation in the industry. We strongly believe that the significant acquisition of spectrum assets by the incumbents will help them in offering superior QoS and raising tariffs in the medium to long-term
HSBC Analyst Writes 4G LTE by incumbents will not Launch in 1800Mhz until next 900Mhz Auction
The surprise element has been addition of 1,800 spectrum by incumbent telcos in markets where they face the renewal of their 900 spectrum in next 12-15 months. Furthermore, we do expect incumbent operators to get in “land grab” mode on 3G/data and 3G rollout picking up pace. We believe incumbent telcos are unlikely to rollout data (LTE) on 1,800 until the next 900 auctions conclude.