India’s operators shun 700-MHz band as spectrum auction reaches $8.5b

india spectrum auction
Credit: pdarak7/Shutterstock

India’s latest spectrum auction is well underway, but telecoms players are reportedly playing it cool and steering clear of the premium 700 MHz band because the DoT is charging too much for it.

The spectrum auction, which kicked off Saturday, had raised Rs 56,792 crore ($8.5 billion) as of Monday, although most of that came on Day 1.

So far the most popular spectrum bands have been 1800 MHz and 2300 MHz as Bharti Airtel, Idea Cellular, Reliance Jio Infocomm and Vodafone India look to beef up 4G capacity.

The 800-MHz band (also touted as a 4G band) has seen bidding action in just four circles, according to the Economic Times, while the 2500-MHz band is receiving bids in ten out of 22 circles – mainly as a backup in case the 2300-MHz is boosted out of their price range.

The 2100 MHz band is also struggling to attract demand outside of operators like Bharti Airtel, Idea and Vodafone, who already offer 3G services and want to fill in coverage gaps.

However, the 700-MHz band has received no bids whatsoever [PDF] after two days of bidding, despite the fact that it’s considered a prime band for 4G services. As the Economic Times reports, the band is simply priced too high:

“No bidding in the premium 700 MHz band clearly indicates that the operators are not ready to commit investments to the overly priced band with (an) underdeveloped ecosystem,” said Prashant Singhal, global telecommunications leader at EY.

Goldman Sachs said it expects “no bidding activity in this band”. Pankaj Agarwal, partner at advisory firm PhillipCapital, said the overall activity rate at 90 per cent is very high now. “So it looks like the auction is beginning to wrap up.”

According to Reuters, the spectrum on the block is valued at $84 billion based on the auction reserve price set by the government. At $8.5 billion after two days, the bids are clearly falling way short of that.

However, it’s also more or less in line with expectations from industry analysts who predicted back in August that no one would bid for the 700-MHz band given the high price and the fledging status of India’s 4G ecosystem. And given that some analysts had forecast bids to top out at $3.5 billion, the auction is actually exceeding conservative expectations.

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