Telcos may buy spectrum worth Rs 71,000 cr in 5G auction: IIFL

Private telecom operators -- Reliance Jio, Bharti Airtel and Vodafone Idea -- are expected to buy spectrum worth Rs 71,000 crore in upcoming auction, leaving a vast majority of the radiowaves unsold

The three private telecom operators -- Reliance Jio, Bharti Airtel and Vodafone Idea -- are expected to buy spectrum worth Rs 71,000 crore in the upcoming auction, leaving a vast majority of the radiowaves going under the hammer unsold, according to research firm IIFL Securities.

The government will next month auction about Rs 4.3 lakh crore worth of airwaves capable of offering fifth-generation or 5G telecom services, including ultra-high-speed internet.

According to the report released on Wednesday, the government's in-principle nod to allocate spectrum directly to enterprises is going to have an adverse outcome of the mega auction.

"While supply is abundant, the government has not cut TRAI's proposed reserve prices despite telcos' assertion that these were still high. We see telcos bidding only for 4 of the 10 bands and spectrum should be sold at base price. We estimate spectrum outlay of Rs 37500 crore, Rs 25000 crore and Rs 8500 crore for Jio, Bharti and Vi," IIFL said.

The research firm further said if all telecom operators avail the option of equal annual installments over 20 years, the government would receive Rs 6,200 proceeds in the current financial year.

It said telcos may give the premium 700 MHz band spectrum a miss as they await further reserve-price cuts. Jio and Bharti may bolster their sub-1 GHz holdings by bidding for the 850 MHz and 900 MHz bands, respectively.

"We do not assume any bids in the 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands. Bids for 3.6 GHz are somewhat tricky to predict," it said.

The report further said telcos could bid for small quantities in the 3.6 GHz and 28 GHz bandd -- seen as the prime radiowaves for 5G technology -- as it can lead to large savings in spectrum usage charges.

The Department of Telecom (DoT) has issued a new order that will enable telecom operators to reduce spectrum usage charges proportionately on buying fresh radiowaves in the upcoming 5G auction.