Spectrum Auction Analysis (Based on Day1 Report): Strategic Shifts and Future Implications for India's 5G Landscape
Despite continued bidding, the spectrum auction's initial round highlights clear strategic intents, with minimal impact expected on advancing India's 5G capabilities in the immediate future
The first day of India's spectrum auction has just wrapped up, completing five rounds, with the total bid value reaching ₹11,259 Crore across the 900, 1800, 2100 MHz and 2500 MHz bands. As I had earlier predicted, the 800 MHz band experienced no demand. This article aims to analyze the auction dynamics, exploring the bidding strategies of operators and the varying demand across different circles. Before delving into the details, let's review a summary of the day's outcomes, illustrated in the following image.
Overall Summary
The image below provides a detailed circle-wise breakdown for the three bands (900, 1800, 2100 MHz, and 2500 MHz), showcasing both the financial outflow and the amount of spectrum sold in each.
In the detailed band-by-band breakdown of the spectrum auction, the 900 MHz band led in revenue, securing ₹6,985 Crore for 60.4 MHz sold. This was closely followed by the 1800 MHz band, which generated ₹3,579 Crore from 50.6 MHz sold. The 2100 MHz and 2500 MHz bands, while more modest, still produced ₹546 Crore and ₹150 Crore for 20 MHz each, respectively. Notably, no bids were placed for other spectrum bands.
While some circles in these bands have seen clock round prices exceed the reserve price, this may not necessarily indicate competition but rather the impact of limited bids for small spectrum slices by a single player, leading to price increases. We will delve deeper into these nuances in the follow-up section.
Analysis of the 1800 MHz Band: A Circle-Wise Overview
The chart below provides details on the spectrum holdings of operators and the spectrum available for auction in the 1800 MHz band.
After examining the spectrum holdings, let's take a closer look at the snapshot of the bidding matrix across various bands based on the DOT's Day 1 report provided below.
From the analysis of bidding speculation across the ten active circles, it appears that only two—Bihar and West Bengal—are likely to experience competitive bidding between Bharti and RJIO. In the remaining circles, despite increases in clock round prices, there is only one bidder. Therefore, an increase in clock round prices should not necessarily be interpreted as an indicator of competitive bidding in those circles. This phenomenon is due to auction rules stipulating that prices will increase when there is zero excess demand.
Thus, out of the total bids amounting to ₹3,580 Crore, it appears that RJIO and Bharti are almost evenly matched, with RJIO contributing ₹1,751 Crore and Bharti ₹1,709 Crore. VI, on the other hand, has contributed a relatively modest ₹119 Crore.
Analysis of the 900 MHz Band: A Circle-Wise Overview
The chart below provides details on the spectrum holdings of operators and the spectrum available for auction in the 900 MHz band.
After examining the spectrum holdings, let's take a closer look at the snapshot of the bidding matrix across various bands based on the DOT's Day 1 report provided below.
Similarly, among the 14 circles that have seen bidding, only two—West Bengal and J&K—are experiencing competitive bidding. This situation mirrors what was described earlier in the 1800 MHz section, where price increases in three of the four circles occurred due to bidding on small slices of spectrum rather than widespread competitive activity.
Regarding the total outflow of ₹6,985 Crore, Bharti has secured the lion's share, contributing ₹6,020 Crore, while VI has likely spent only ₹965 Crore.
Analysis of the 2100 MHz Band: A Circle-Wise Overview
The chart below provides details on the spectrum holdings of operators and the spectrum available for auction in the 2100 MHz band.
After examining the spectrum holdings, let's take a closer look at the snapshot of the bidding matrix across various bands based on the DOT's Day 1 report provided below.
In this band, it appears that Bharti is actively bidding to increase its existing holdings from 10 to 15 MHz. VI has not placed any bids, and RJIO shows no interest in this band. Consequently, the total outflow of ₹545 Crore for this band is solely contributed by Bharti.
Analysis of the 2500 MHz Band: A Circle-Wise Overview
The chart below provides details on the spectrum holdings of operators and the spectrum available for auction in the 2500 MHz band.
Now, let’s examine the bidding matrix provided below.
From the data, it’s clear that VI is actively bidding in Bihar, aiming to expand its spectrum holdings from 10 to 20 MHz. Other operators show no interest in this band. Consequently, the entire outflow of ₹150 Crore in this band is attributed solely to VI.
Summary of Outflow
Having examined the bidding activity across individual bands, and considering the interest of each operator within these bands and circles, we now present a summary map detailing the total outflow attributed to each of the players. This graphical representation is provided below.
Bharti is responsible for 73% of the total bid value, followed by RJIO at 15.5%, and VI at 11%. Bharti significantly dominates the contributions. While my analysis may not be 100% accurate, it appears that any potential changes in the bidding matrix are most likely to occur in the 1800 MHz band.
Conclusion
As previously predicted, the 800 MHz band saw no bidding, confirming my earlier projections. This outcome was anticipated, as RJIO's focus has shifted towards expanding its spectrum in the 700 MHz band, the newly designated 5G band, rather than the 800 MHz band. Similarly, Bharti refrained from pursuing the 800 MHz band, aligning with my prediction that auction rules favoring unequal slots for incumbent and new operators would hinder their ability to bid effectively. As a result, the 800 MHz band remains underutilized, a situation I had long suggested could be resolved by allocating this spectrum to BSNL.
Looking ahead, RJIO and Bharti's needs are clear, with RJIO seeking expansion in the 700 MHz band and Bharti in the 600 MHz band. Unfortunately, both bands were excluded from this auction, suggesting that the quality of 5G services in India may continue to lag without changes to the current structure.
Regarding Bharti, their bidding in the mid-band spectrum appears to be a risk mitigation strategy aimed at enhancing the uplink capabilities of 5G, which could marginally improve network performance. RJIO and VI, on the other hand, seemed to lack a defined strategy, engaging only in incremental bids. While the auction may extend for a few more rounds due to competitive bidding in some circles, these seem more procedural than substantive. The essential strategies were evident from the first round, and no groundbreaking shifts are expected in subsequent rounds.
The expected auction outflow is around ₹12,000 Crore, and India may have to wait for more affordable low-frequency spectrum to be available to enhance the quality of 5G services and enable effective monetization at the handset level. Until then, we can only wait and hope for strategic improvements.
Parag - a very good analysis of the first day of Spectrum auction.