India’s telecom operators are expected to fork out about ₹1-lakh crore to buy spectrum at the forthcoming auction, which is likely to be held in the next 2-3 months, according to credit rating agency Crisil.

The agency estimated that of this amount, nearly 75 per cent will 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.

Estimated outgo As per Crisil’s estimate, the outgo towards spectrum acquisition in the current fiscal will be about ₹37,000 crore, which is lower than the budgetary estimate of around ₹56,00 crore.

The agency observed that it will still be a significant outgo for an industry reeling under about ₹4-lakh crore of debt, as of March 2016.

The Centre plans to put over 2,300 MHz of spectrum on the block, across seven frequency bands, at the forthcoming auction – the highest quantity of airwaves being sold at one go.

Ajay Srinivasan, Director, Crisil Research, said: “Unlike previous auctions, operators this time do not face business continuity issues. Yet, we expect reasonably healthy participation as incumbents will ramp up their 3G and 4G spectrum holdings ahead of Reliance Jio’s entry.

“Telcos are already facing increased network congestion in circles with high data consumption (mainly metros and Category A circles, which account for about 60 per cent of India’s data traffic), and therefore, augmenting network capacity and spectrum holdings will be critical for maintaining their competitive position. Overall, telcos are expected to fork out about ₹1-lakh crore.”

Expected trend

Crisil expects bidding in the 700 MHz band to be extremely selective, with players preferring the less pricey 1800 MHz.

The agency opined that about half the spectrum put on the block in the 1800 MHz and 2100 MHz bands, and most of it in 800 MHz and 900 MHz bands, would be lapped up, while bidding interest in 2300 MHz and 2500 MHz is expected to be limited.

The top three telcos – which cumulatively account for three-fourth of the sector revenues – are expected to account for 55-60 per cent of the total spending at the auctions.

Deciding factor The aggression of individual operators in bidding will be influenced by their 3G/4G spectrum holdings in key circles, and quantum of contiguous spectrum held.

Srinivasan said: “The large telcos are cumulatively likely to spend ₹1.2-lakh crore over the course of the current and next fiscal on spectrum payouts as well as network augmentation.

“With profitability and operational cash flows of the sector projected to come under pressure with the launch of Reliance Jio’s services, the reliance on external funding is set to increase.”

Crisil’s analysis shows that the large telcos will need external funding of around ₹50,000 crore to meet their spectrum and network investments over the next 2 years.

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