Telecom shares down as spectrum auction begins

Shares of mobile phone service providers such as Bharti Airtel, Reliance Comm and Idea were down 1.5-2% each on worries that aggressive bidding for the 900-MHz bandwidth with the entry of Reliance Jio would lead to higher costs for retaining the spectrum.

Spectrum in the 900-MHz spectrum has boosted the incumbent operators' average revenue per user (Arpu) in the Delhi, Mumbai and Kolkata circles. For them, retaining airwaves in this band will part of their strategy. In the absence of this spectrum, the only choice for them will be bidding for 1800-MHz spectrum. Since the latter band is less efficient, they will have to install more towers. This will increase their capex requirement.

The apex court decision has removed the hurdle for the government’s spectrum auction process and the telecom operators in the fray are expecting a fierce price battle for airwaves in the 900-MHz band, considered very efficient for data and voice services. According to them, the final price could be between 40 per cent and 70 per cent higher than the base price. Many of them have even readied a ‘war chest’ to continue bidding up to these levels.

Entry of the Mukesh Ambani-controlled Reliance Jio in the race for 900-MHz spectrum is likely to play a spoiler for incumbents Bharti, Vodafone and Idea, as there will be a four-cornered contest for three slots that are up for grabs.