Broker Credit Suisse sees all the major telecom companies of India making an attempt to buy fresh 4G spectrum in the upcoming auctions expected to take place in March.
Despite making contrary noises, the telcos are likely to buy airwaves as it is a ‘once-in-20-years’ opportunity, the broker said in a note to clients.
According to its estimates, Vodafone and Telenor are seen as the most in need of such buys, followed by Reliance Jio, Bharti Airtel and Idea Cellular.
Even though the three top holders of 4G spectrum — RJio, Airtel and Idea — have opposed selling more 4G suitable spectrum in the 700 MHz band, Credit Suisse expects all of them to eventually participate in the upcoming auctions going by precedent.
“..even before the March 2015 auctions, the industry did issue various statements warning of weak demand in auctions. Even our own expectation was that the 800/2100 MHz spectrum auctions would fail to see any bidders in 2015. The eventual behaviour of the industry in the auctions took everyone by surprise.”
At the same time, cautioned the analysts, only part of the spectrum is likely to be sold.
They felt that Norway-based Telenor is likely to make a bid for 4G airwaves in an attempt to boost its data offerings.
“In September 2015, Uninor rebranded itself as Telenor and has indicated that it will focus on data through 4G… These auctions could provide Telenor an opportunity to enter the LTE race—either through 2100 Mhz or even 700 Mhz bands. This is also visible in its reply to the consultation paper where it is in favour of conducting the 700 auctions,” said the note.
Vodafone, on the other hand, could end up purchasing both 2100 MHz spectrum (suitable for both 3G and 4G) and 2300 MHz (suitable for 4G). Despite being second only to Bharti in terms of revenue, the operator ranks fifth in India in terms of access to 4G-suitable spectrum.
Vodafone at present has 4G spectrum in only five circles– Delhi, Mumbai, Kolkata, Karnataka and Kerala.
“This auction would be an ideal platform for Vodafone to complete the LTE footprint. Further, similar to Idea, Vodafone could try to complete its 3G footprint on 2100 band in the remaining seven circles.”
In case of Idea Cellular — the third biggest operator in the country, it said: “Given the late start, and the recent sprint by Idea to launch LTE services, we can safely assume that Idea would be keen to complete pan-India LTE foot-print.”
Credit Suisse analysts also felt that the Aditya Birla Group company could also try to buy 2100 MHz spectrum in the ten circles where it doesn’t have its own 3G networks. (We, however, believe it is unlikely to try that due to leverage concerns and is likely to focus only on 4G.)
India’s biggest telecom operator, Bharti Airtel, already has near pan-India 3G spectrum and 4G spectrum in 15 out of the 22 zones. “As a priority, Bharti would likely try to fill the gaps in its 3G/4G coverage.” It is also likely to bridge the spectrum deficit it has with RJio by completing its pan-India footprint on 2300 MHz band by buying spectrum in the 13 circles where it doesn’t already own it, the note said.
The only player that doesn’t need to buy new spectrum in the upcoming auction is Reliance Jio, as it has pan-India 4G spectrum, and a lot of it at that. However, it too may end up opening its purse strings, the broker felt.
“RJio would likely try getting more sub-1GHz spectrum in these auctions,” pointing towards the 700 MHz band.
JIO ALREADY BIGGER THAN IDEA, VODAFONE
The analysts also said that Reliance Jio has overtaken both Idea Cellular and Vodafone in terms of having the biggest network in India, even before starting commercial operations.
“Accounting for technology efficiency, RJio has the second largest network capacity nationwide,” it said.
The average 4G spectrum holding of Jio is over 15 Mhz per circle, which is the highest in the industry by a large margin. Airtel has only around half of that.
Bharti, however, continues to have the highest capacity in India due to its substantial 3G and 2G holdings, which RJio doesn’t have.
Surprisingly, in terms of 3G+4G spectrum capacity, Idea has an average of around 10 MHz per circle, higher than Vodafone’s average by almost 2 MHz according to analysts’ estimates.