Telecom operators to shell out Rs. 1 lakh cr. for spectrum : Crisil

More network capacity will be critical for companies, given the increased network congestion.

NEW DELHI, 01/05/2013: Bharti Infratel, the tower arm of Bharti Airtel tied up with telecom units of Reliance Industries to lease out its towers, announcing the deal, a joint statement had said that Bharti and Reliance Jio would continue to build on this "strategic framework" and consider other mutual areas of cooperation and development. Photo: V.V. Krishnan

India’s telecom operators are likely to fork out about Rs.1 trillion (Rs.1 lakh crore) to buy spectrum at the upcoming auctions, according to Crisil.

The rating agency added that of this, nearly 75 per cent would be spent by private telecom operators.

“Our view is based on an analysis of circle-wise market position and spectrum holdings of operators, the trends and stupendous growth projected in data usage, and the likely competitive scenario,” it said in a press statement.

Last month, the Union Cabinet had approved the sale of about 2,300 MHz of spectrum — the highest quantum of airwaves sold at one go — at the auctions, which are expected to take place in September. Going by the reserve price, this has the potential to fetch the exchequer about Rs.5.5 lakh crore. The government had earned revenues of Rs.1.1 lakh crore from the auctions held last year. “Unlike previous auctions, operators this time do not face business continuity issues. Yet we expect reasonably healthy participation because incumbents will ramp up their 3G and 4G spectrum holdings ahead of Reliance Jio’s entry,” Ajay Srinivasan, Director, CRISIL Research said.

He pointed out that the telecom companies are already facing increased network congestion in circles with high data consumption. Therefore, augmenting network capacity and spectrum holdings will be critical for maintaining their competitive position.

In the current fiscal, the outgo towards spectrum acquisition will be Rs.37,000 crore, which is lower than the budgetary estimates of around Rs.56,000 crore, as per Crisil’s estimates. However, it will still be a significant outgo as the telecom industry reeling is under Rs. 4 lakh crore of debt as of March 2016.

The rating agency said that the bidding in the 700 MHz band will be extremely selective, as players will prefer the less expensive 1800 MHz. “About half of the spectrum put on the block in 1800 MHz and 2100 MHz, and most of it in 800 MHz and 900 MHz, would be lapped up, while bidding interest in 2300 MHz and 2500 MHz is expected to be limited,” it added.