With Reliance Jio putting up Rs 4,500 crore as earnest money in auctions for spectrum next month, the new telecom entity could bid for at least one block of 5 MHz spectrum nationwide in the 900 MHz band, together with all the air waves up for sale in the 800 MHz band.
This could see Reliance Jio locking horns with incumbent mobile service providers, for whom retaining spectrum in the 900 MHz band is vital to their business. According to experts tracking the auction, a telecom company had to deposit Rs 3,094 crore as earnest money to bid for 5 MHz of spectrum in the 900 MHz band in all circles up for sale. It can also bid for the entire spectrum available in the 800 MHz band, which varies from 1.25 MHz to 11.25 MHz, depending on the circle, at Rs 1,504 crore.
In the 2100 MHz band, a company must put up Rs 1,478 crore if it wants wants to buy nationwide 3G spectrum. Spectrum is limited in the 1800 MHz band, and wherever available restricted to a few districts and towns. A company wanting to buy the entire spectrum available in this band has to fork out Rs 1,461 crore.
The department of telecommunications has set out the amount a company must deposit as earnest money for each circle. This is a certain percentage of the minimum base price for spectrum that varies across circles. Experts said Reliance Jio, which wanted to be an aggressive provider of data services, needed low frequencies like 800 MHz and 900 MHz to support 4G LTE services. These bands are more efficient than the 2300 MHz band it uses now.
To get over the problem of penetration in the 2300 MHz band - air waves do not reach indoors - Reliance Jio bought spectrum in the 1800 MHz band last February for 14 circles. However, this time there are only three circles, Rajasthan, Himachal Pradesh and Haryana, where it can bid for a block of 5 MHz, the minimum needed for data services. In four other circles, Bihar, UP East and West, and Punjab, where the availability is less than 5 MHz, Reliance Jio may have to settle for the 900 MHz or 800 MHz bands.
Vodafone's earnest money of Rs 3,700 crore defined its focus on 3G services, according to industry sources. The company was likely to bid aggressively for spectrum in the 900 MHz band, especially in the seven circles where it must retain spectrum for use in 3G services, the sources said. It would also bid for the 2100 MHz band in circles where it did not have spectrum, they added.
A similar strategy is expected from Bharti Airtel, which is integrating spectrum in the 1800 MHz and 2300 MHz bands for long-term evolution services. Apart from retaining spectrum in the 900 MHz band in five circles, Bharti Airtel would bid for spectrum in the 2100 MHz band at least in circles where it did not have it to offer nationwide 3G services on its own, the sources said.