Home >Markets >Mark To Market >Telcos beef up 4G capacity in auction, as 5G wait continues

A bird in hand is worth two in the bush. Ahead of the spectrum auctions, some analysts had said Indian telcos will hold back some of their arsenal, given that 5G auctions are expected in about a year. But the bidding on the first day of auctions has taken most people by surprise, with telcos deciding to take what’s on offer, rather than wait for the next auction.

The government has received bids worth 77,815 crore, much higher than the government’s expectations of around 45,000 crore. While some of this pertains to renewal spectrum, a lot of it is for growth.

In a report dated 1 March, analysts at Motilal Oswal Financial Services Ltd said the auction saw a more aggressive response than expected, with total bids being more than 70% higher than the renewal spectrum requirement across the three telecom providers.

Capacity boost
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Capacity boost

Reliance Jio, as expected, spent the most. Apart from 800MHz renewals worth around 20,000 crore, it augmented its Sub-GHz capacity for better indoor coverage. Jio spent 34,491 crore in all for purchasing Sub-GHz spectrum in 19 circles. Note that Jio has ranked high in surveys on network coverage, but slightly lower on quality of service. It has also spent considerably on capacity spectrum in the 2300MHz band, as well as in the mid-range 1800Mhz band.

Bharti Airtel spent a far lower amount of 18,699 crore in the auctions, but it came into the auctions with fewer gaps and not much need for renewal spectrum.

Airtel’s data volumes grew 52% in the past year, much higher than the 22% growth in data volumes on Jio’s wireless network, which appeared to have capacity constraints.

Even so, Airtel has chosen to spend in order to secure pan-India Sub-GHz spectrum. It bid for spectrum in the 800Mhz band in circles where there was no availability in the 900Mhz band. It also augmented capacity by buying spectrum in the 2300Mhz band, and also made considerable investments in the 1800Mhz band.

“Surprisingly, telcos are buying generous amounts of spectrum in the 800Mhz and 1800Mhz band, implying a desire to augment not only coverage, but also improve service quality," said an analyst at a domestic institutional brokerage. “The fact that they are buying spectrum in the 1800Mhz band vis-à-vis cheaper spectrum in the 2300Mhz band is also interesting," he added. This suggests that the telcos are not overly conservative with their spectrum strategy.

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