What explains the subdued bidding in spectrum auction

The government this week raised ₹11,340 crore from spectrum auctions over two days, with Bharti Airtel accounting for about 69% of this by bidding for spectrum worth ₹6,856.76 crore mainly to renew expiring licenses.

The spectrum auction concluded early on Wednesday–Day Two of the sale–with telecom firms acquiring spectrum well below the government’s reserve price of ₹96,238 crore for the available spectrum.

Up for sale were unsold spectrum from the previous auction held in 2022 as well as spectrum licences expiring in 2024 across eight bands: 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz, 2500MHz, 3300MHz, and 26GHz.

Following a “recent (August 2022) 5G auction and the ongoing 5G monetization,” there were no bids for the 800MHz, 2300MHz, 3300MHz, and 26GHz bands, the department of telecommunications said in a statement, adding that from the remaining 533.6 MHz, only 141.4 MHz (26.5%) was sold, even though a significant 51.2 GHz had been sold in August 2022.

Telecom service providers acquired 87.2 MHz worth ₹6,164.88 crore to augment their services, the department said.

Airtel secured 97MHz spectrum in the 900MHz, 1800MHz, and 2100MHz bands for a period of 20 years. The telco said the spectrum purchase aligns with its strategy to develop a large pool of mid-band spectrum to deliver seamless 4G and 5G services.

“Airtel continues to judiciously acquire the right amount of spectrum to deliver the best possible experience to our customers. In this auction, we have bolstered our sub‐giga hertz and mid‐band holding which will significantly improve our coverage especially indoor,” Airtel chief executive officer (CEO) Gopal Vittal said.

Vodafone Idea acquired 30MHz of spectrum across 11 circles to bolster its 4G portfolio and launch 5G services, investing about ₹3,510 crore, while Reliance Jio Infocomm bought more spectrum in the 1800MHz band in Bihar and West Bengal circles for ₹973.63 crore.

Akshaya Moondra, CEO, Vodafone Idea, said: “VIL has strategically acquired spectrum in the select markets to enhance and strengthen its overall spectrum portfolio. This acquisition will enable us to effectively use dedicated sub GHz spectrum towards advanced technologies to enhance the experience we offer to our customers.”

Akash M. Ambani, chairman of Reliance Jio Infocomm Ltd, said: “This new spectrum acquisition will continue to enable us serving aspirations of the new India, in terms of growing traffic demands and superior customer experience, which is no longer limited to only urban markets.”

Most sectoral analysts had foreseen a subdued response to the latest spectrum auction.

Ankit Jain, vice-president of Icra, said, “The participation in this spectrum auction was largely driven by the renewals of the expiring spectrum in the 900MHz and 1800MHz bands, coupled with some purchases in the 2100MHz and 2500MHz bands to strengthen the network.”

The quantum of total spectrum sold was only 1% of the total spectrum on offer, while value wise it was only 12%, Jain added.

The government’s coffers had grown by ₹1.5 trillion after a seven-day, 40-round bidding marathon in the August 2022 spectrum auction.

Reliance Jio had then lapped up spectrum worth more than ₹88,000 crore, while Airtel and Vodafone had spent ₹43,084 and ₹18,799 crore, respectively.

The current spectrum auction will be valid for 20 years, and operators can pay the amount in whole or in 20 equal annual installments with an interest of 8.65%.

The telecom service providers can share, lease, or surrender the spectrum after a minimum of 10 years from the date of assignment​.