India's 5G spectrum auction kickstarts

After many delays, India's much-awaited 5G spectrum auction has finally kicked off. Here's the lowdown:

What's on sale?

A total of 72GHz in low (600MHz, 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz), mid (3300MHz) and high (26GHz) frequency bands. This is believed to be India's biggest-ever spectrum sale.

The spectrum is valid for 20 years and, going by the base reserve price, will cost at least 4.316 trillion Indian rupees (US$54 billion) if all of it is sold. Winners will need to make payments in 20 equal installments in advance at the beginning of each year. Besides this, the government has also done away with spectrum usage charges (SUC) to drive bidding.

Who's bidding?

There are four companies participating: Reliance Jio, Bharti Airtel, Vodafone Idea and Adani Group. Apart from the three service providers, Adani Group, through its company Adani Data Networks, made a surprise entry earlier in July.

The group clarified that they don't plan to enter the consumer mobility space and are procuring spectrum to set up private networks for their own companies, in airports, ports and manufacturing industry verticals, spread across the country.

How much earnest money are auction participants depositing?

While Reliance Jio has deposited the maximum amount of INR140 billion ($1.75 billion), Adani Data Networks deposited just INR1 billion ($12 million). Typically, players acquire spectrum worth more than six times the deposit. In that case, Adani Group is likely to acquire the least. This comes as a relief to the telcos, which had predicted that the group was planning to move into consumer mobility.

Table 1: Earnest money deposits

CompanyAmount (INR/USD)Reliance Jio140 bn/$1.75 bnBharti Airtel55 bn/$0.68 bnVodafone Idea22 bn/$0.27 bn(Source: Company data)

Is bidding likely to be aggressive?

There is abundant spectrum available in all low-, mid- and high-frequency bands, which means it is unlikely that the service providers will indulge in aggressive bidding. Considering the high earnest deposit of Jio, even if they bid for the maximum spectrum allowed per player, enough spectrum would be available for other participants.

Additionally, service providers raised concerns about high reserve prices in the past, and because of this, the spectrum in the 700MHz band remained unsold in the past two auctions in 2016 and 2021.

Yet there is sustained bidding by Reliance Jio and Bharti Airtel. At the end of day two (July 27), bids worth INR1.490 billion ($18.64 billion) had been recorded, and the ninth round was underway.

This means a better-than-expected response from participants. Media reports indicate that even 700MHz – which did not elicit any response in the past two auctions – has managed to attract some interest. As expected, most activity is around acquiring mid-band spectrum.

The government is likely to allocate spectrum by August 15, which will finally lead to the launch of commercial 5G services by September or October 2022.

All three private telcos have been carrying out extensive trials of 5G since 2021, and are prepared to go live soon. It's been reported that Airtel, Jio and Vodafone Idea have already awarded 5G contracts to vendors, taking them a step closer.