5G spectrum auctions sees record bids on first day

5G spectrum auctions sees record bids on first day

Indian Market
by 5paisa Research Team Last Updated: 2022-07-27T16:51:48+05:30

The much awaited 5G spectrum auctions on 26th July and at the end of the first day, the government had received record bids worth Rs145,000 crore. Here are the key takeaways from the first day 5G spectrum auctions conducted by the Indian government.

a) Out of the bids of Rs1.45 trillion received by the government after 4 rounds on Day 1, even the highly pricey 700 MHz band saw bidding for the first time. There was also strong bidding interest in the mid-band (3.3-3.67 GHz) and high-band (26 GHz) airwaves.

b) The 3 major bidders viz. Reliance Jio, Bharti Airtel and Vodafone Idea had bid for mid and high-band airwaves. This is good enough to launch services which can offer 10 times higher mobile internet speeds than 4G. Adani Data Networks was a smaller player.

c) The real area of interest will be the data on the 5G spectrum bidding. Here, minimum of 10 MHz is needed for optimum 5G services. The band had remained unsold in the last two auctions due to high base price. That has been cut by 40% this time around.

d) The total revenue implied of Rs1.45 trillion is a record of sorts and it is estimated that the bidding for the 5G spectrum auctions should close on Wednesday, 27th July. The four rounds had seen good participation from the bidders. In terms of previous records, the maximum auction proceeds was Rs1.09 trillion in the year 2015.

e) Let us come to the specific players in the bidding game. It is estimated that the auction spend would be Rs70,000 crore for Reliance Jio, Rs50,000 crore for Bharti Airtel and Rs20,000 crore for Vodafone Idea. In the case of Adani Data Networks, the total auction spending would be under Rs1,000 crore. 

f) Inputs at the end of Day-1 of the auctions showed that the bidding for bands such as 900 MHz, 1800 MHz, 2100 MHz and 2500 MHz, came in at the base price. This can be largely attributed to the ample spectrum on offer and only 2 serious bidders for this range. However, the 600 MHz, 800 MHz and 2300 MHz bands did not attract any bids on Day-1.

g) According to government officials, the spectrum allocation process is expected to be completed before August 15th so that telcos can officially launch 5G services. This will allow the telcos to work on installing devices and target service launch by the last quarter of the current year 2022. That means, by the end of the year, Indian telecom users would be in a position to experience 5G services in multiple cities. 

h) It is not yet clear how the pricing of the 5G services would be done, because that is the prerogative of the industry players. However, it is expected that the 5G services would be priced at an approximate premium of around 15% over the normal services, although one can logically expect this premium to narrow as the usage and acceptance widens.

i) A quick analysis of the bidding patterns reveals that the three telcos have selectively topped up in the 1800 MHz band in key markets. Only Vodafone Idea has been the bidder for the 2500 MHz in the state of Andhra Pradesh.

One this is certain that this is going to be a record collection auction for the government and that is the good news. Now, the next big question is how the telcos will price this additional cost of 5G, how they will be able to enhance the quality of their service post this bidding and how the overall user experience improves as a result of this spectrum auctions. For that, we have to wait for some more time, at least till the end of this year.

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