All you need to know about India’s biggest spectrum auction and what will it do for you

The telecom industry has been in the news for a couple of weeks for the never-ending war of words between Reliance Jio and the rest of the industry. And now there is yet another battle ground for telcos to fight on, spectrum auction. India has kick started its biggest ever spectrum auction, govt has put 2354.55Mhz spectrum for sale across all spectrum bands including 700Mhz, 800Mhz, 900Mhz, 1800Mhz, 2100Mhz, 2300Mhz, and 2500Mhz. With the sale of spectrum across all bands in this round of spectrum auction the govt is expected to earn Rs. 5.63 lakh cr. Telecom operators, Reliance Jio, Airtel, Vodafone, Idea, Reliance Communication, Aircel, and Tata Teleservices are all participating in the spectrum auction.

Spectrum auction is an online auction and telecom operators submit their earnest money deposit (EMD) to the department of telecom and the EMD then translates into eligibility points and depending on the eligibility points operators can bid for the quantum of spectrum and choice of bands and circles. It is likely to go on for a couple of days. It goes on till there is action by participants. There is no end limit fixed by the govt. The 2010 spectrum auction went on for over a month.

The two major players in the industry Bharti Airtel and Reliance Jio who are sparring majorly over the ongoing issue of points of interconnection (PoIs) are expected to fight it out for spectrum too. Analysts say there is going to be huge interest in 2300mhz and 2500mhz (“4G bands”) due to low pricing of the bands. Reliance Jio already has a pan India presence in 2300MHz which is a BWA band and Airtel also covers most of the circles in the band. But both players can look at 2300mhz to boost their networks. Govt for the first time has put the premium 700mhz LTE band on auction, Reliance Jio may look at the premium band as it is the only operator eligible to bid for pan India 700MHz spectrum. Telecom operators had raised concerns in the past to make more spectrum available in the 2100mhz band (“3G”) and also to reduce the price of spectrum, the govt now has made ample amount of spectrum available in 2100mhz band this time around, we’ll have to see how many takers it finds.

Apart from the two big players, this round of auction is going to be key for Vodafone and Idea. Both companies are looking to grow their 4G footprint in the country. With Vodafone having pumped in Rs. 47,700 crore equity investments from its parent firm it is expected that Vodafone will bid aggressively in this auction possibly looking at 1800MHz, 2100mhz, 2500mhz in order to grow their 4G network. Idea too will look at these bands in order to grow their foothold in the growing 4G market in the country. It is expected that both these players will come out stronger (in terms of their 4G presence) from this spectrum auction having invested heavily in “4G” spectrum.

The curious case of 700MHz

For the first time the govt has put the 700mhz on auction, it’s a premium LTE band and there was quite an uproar on the issue of 700MHz band whether the pricing is right and with a nonexistent ecosystem is it the right time to auction the band. Just like when Jio bought 2300mhz band way back in 2010 and launched the services only recently on September 5 2016. But the govt decided to stick to the price and the time for selling the 700MHz band. In this round of auction as per the eligibility points only Reliance Jio is eligible to bid for the premium band. The pan India reserve price for 700MHz itself is as high as Rs. 11485 crore and has the potential to fetch the govt over 4 lakh crore. However although the 700MHz comes with a heavy price tag it is an extremely efficient band for LTE services and can reduce the infrastructure investment by 70%. Even if Jio invests in it, it will still be a couple of years before we see roll out of the services.

What does it mean for the consumer?

First the spectrum auction is likely to carve out four major 4G telecom operators Airtel, Reliance Jio, Vodafone, Idea, considering with the amount of spectrum put on auction it will help all these players including Idea and Vodafone to put together a strong network. And with four strong operators proving 4G services it will mean the competition is going to be fiercer. With the large amount of spectrum made available by the govt for the telecom operators, customers can expect better services and expect improvement in ongoing issues such as call drops and poor data speed. We have already seen a correction in tariff across all major telecom operators after the entry of Reliance Jio and with four strong players emerging in the market, the level of competition is likely to result in further reduction in tariff.


Image Credit : Indiatimes