India 5G auction set to disappoint

On the eve of the auction the Economic Times quoted unnamed industry analysts as predicting that the big three together – the only three qualified bidders listed by the Department of Telecommunications (DoT), incidentally – will commit around 125 billion rupees (US$1.5 billion) to the sale, which in value terms is just shy of 13% of its base price.

Essentially, the telcos do not need the additional spectrum, particularly given the relatively low take-up rate for 5G in India. Hence they will not fork out unnecessarily.

The paper notes that the earnest money deposits (EMDs), in form of bank guarantees submitted by Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea are much lower than they have been in the past, which is a strong indicator of muted demand.

Reliance Jio has submitted the biggest EMD at INR30 billion (US$360 million), a figure 10 times bigger than that committed by Vodafone Idea and almost three times larger than Bharti's EMD. As such, there are rumblings that Reliance Jio might try to pick up additional spectrum in circles in which its rivals are seeking to renew their holdings, and that could mean a bidding war for certain frequencies.

But that's highly speculative. For the most part, this auction will be about telcos renewing spectrum holdings that are set to expire and potentially filling a few gaps with some new frequencies. Bharti Airtel and Vodafone Idea are facing renewals, while Reliance Jio is not. The market leader will look at picking up 1800 MHz frequencies though, the paper said.

Reliance Jio has just cemented its position as India's biggest mobile operator, incidentally, with new regulatory figures showing that it recorded more than three times the net customer additions of closest rival Bharti Airtel in April. Reliance Jio ended the month with 472.4 million mobile customers and a market share of more than 40%, according to the TRAI's latest numbers. Bharti Airtel had a 33% share of the market at the same date, followed by Vodafone Idea in a fairly distant third place with just under 19%.

When the auction proper gets underway on Tuesday, the three telcos will have as much as 10.5 GHz of frequencies in eight bands to bid for: 800 MHz, 900 MHz, 1800 MHz, 2.1 GHz, 2.3 GHz, 2.5 GHz, 3.3 GHz and 26 GHz.

The DoT set out plans for the auction, including its reserve price of just over INR963 billion, earlier this year with a view to kicking off the action in May. However, it has delayed the sale a couple of times, firstly to push it back until after the Indian elections and most recently for an unspecified reason earlier this month.

Barring another auction eve postponement, the country is geared up for bidding to begin in what is now a matter of hours, but the hype that accompanied India's last 5G airwaves sale in August 2022 is simply not there. That auction raised a massive US$19 billion.

By comparison, this sale could be something of a disappointment. That very much depends on your perspective though. While those hoping to boost state coffers from the auction may well be disappointed, a much smaller final bill will doubtless come as a relief to the telcos, for whom monetising 5G still seems a way off.