The telecom auction bid placements will further strengthen the two large operators — Bharti Airtel and Reliance Jio. Both will remain well positioned to gain market share from Voda-Idea (Vi) and with large investments in network, said analysts tracking the sector.
According to them, with 63 per cent of the spectrum unsold at the auction, there is also likelihood of reduction in reserve price in the future.
“Historically, the government has cut spectrum prices by 30-40 per cent if it saw no demand in the previous auction and this will be a significant positive, especially for 5G. Further, in future 5G auctions with the 275MHz spectrum available in 3.3-3.6GHz bands alone (besides other bands) and only three operators, there will be good supply,” brokerage firm CLSA said.
According to BofA Global Research, a key question was whether to expect higher tariffs to help offset higher investments.
“The initiative for tariff hike should largely come from Vi as it is the most in need of it...both Jio and Airtel will focus on improving their market share in the near term given their stronger balance sheets as compared to Vi,” it said.
No knee-jerk reaction
There may not be any knee-jerk reaction from Jio on tariff hike just because it spent more in auctions. While in the medium-term it is keen to raise tariffs, in the near term, Jio's focus could be on gaining subscribers (especially on 2G), it said.
Airtel/ Jio will have sustainable advantage in the long run, and will fortify their 5G spectrum position. However, post the auction, BofA sees Vi having a disadvantage in 5G given its weaker balance sheet.
Jefferies Group LLC said given that Jio has the highest tower and fibre on network, spectrum purchase will enhance its capacity. Jio is likely to focus on selling excess capacity as marginal cost of unit data/ voice is negligible for telcos.
“Moreover, Airtel's spectrum acquisitions in below 1GHz in Maharashtra and Madhya Pradesh, the key markets of Vodafone Idea, and focus on B-circles reflect its focus on gaining share,” it said.
IIFL Securities said though Airtel has completed its pan India sub-1GHz footprint, Jio has a higher sub-1GHz spectrum and its higher spectrum holding is likely to ease its capacity constraints.
The telecom spectrum auction that started on Monday, concluded on Tuesday with only six rounds and only the three telcos (Airtel, Jio and Vi) participating in it. This was the first auction after five years and the government sold airwaves worth ₹77,814.80 crore.