Several investment banking firms suggest that Bharti Airtel, Reliance Jio, Vodafone and Idea Cellular have acquired spectrum primarily in line with their mobile data strategies.
Bharti Airtel
These spectrum wins add to Bharti Airtel’s pan-India 3G and 4G spectrum portfolio, giving it the largest spectrum in the Indian telecom sector, according to CLSA.
Bharti Airtel’s edge in 4G has been particularly boosted as Bharti now has the maximum possible 4G capacity spectrum in 2300MHz (30MHz in 11 circles) which contributes two-thirds of its revenue. It also has 4G spectrum in the 1800MHz and 2300MHz bands in 18 of 22 circles in India.
Since FY10, Bharti Airtel has acquired spectrum worth $14.7 billion, fortifying its industry leadership.
Bharti Airtel’s spectrum edge has driven revenue share gains, particularly in metro and A-circles, where its share grew 180bps to 33 percent vs Vodafone’s 10bp loss to 25 percent. Given its spectrum gains and improving execution, Airtel remains well placed to leverage India’s ongoing mobile data boom. A disruptive entry by Reliance Jio could impact Bharti Airtel’s data revenue growth.
Credit Suisse said competitive compulsions have forced Airtel for more aggressive bidding. Since Vodafone India and Reliance Jio Infocomm also paid bigger amounts, the indication is that nobody has been spared in the damaging spectrum race.
Bharti Airtel has closed its 3G/4G coverage gap in a few markets. Crucially it purchased significant additional spectrum in the 2300 MHz band which boosts its data capacity and implies an expectation of rapid growth in data usage, according to Deutsche Bank.
Bharti Airtel now has the ability to provide pan-India 4G via 1800MHz for coverage and 2300MHz for capacity across all markets.
Bharti Airtel chose its circle-spectrum combinations wisely, expanding capacity selectively across both 3G and 4G bands, in addition to filling up its only broadband gap – 3G in Kerala. The additional 2300 MHz carrier acquired by Bharti Airtel in 13 circles will act as an extra capacity layer in a number of their key circles, according to Kotak.
The company now has total pan-India spectrum bank of a tad over 700 MHz, ahead of Jio’s 558 MHz. Of Bharti AIrtel’s 702 MHz overall spectrum portfolio, nearly 520 MHz is for 3G or 4G. 2300 MHz has largely been won by Bharti Airtel and Jio, while spectrum in the 2500 MHz band has largely been won by Idea Cellular and Vodafone India.
Airtel now has 2100 MHz 3G footprint in 20 circles with five circles having two carriers, 1800 MHz FDD in 21 circles and 19 circles in 2300 MHz TDD and 11 circles with additional carrier, according to Morgan Stanley.
Bharti Airtel has maintained its spectrum advantage vs rivals and holds ~44 percent more spectrum on average vs Jio / Vodafone / Idea, and ~50 percent more 3G / 4G spectrum vs Vodafone / Idea, according to Goldman Sachs.
4G spectrum bands saw most bidding. There was high demand for 4G spectrum, with 2300 MHz band being fully sold out and aggressive bidding for 1800 MHz in some circles. Bharti plugged its 3G gap in Kerala and bought additional 3G spectrum in 4 circles. It also bought 10 MHz in the 2300 MHz band in 13 circles. Bharti already has a 20 MHz block in 17 circles. This will give Bharti considerable data capacity.
Idea Cellular
Idea Cellular has filled its 1800/2100 MHz gaps and bought 2300/2500 MHz bands. The aggressive purchase by Idea Cellular was a surprise for investment banking firms.
Idea has strengthened its position in its key legacy markets, Jio has concentrated on 2300Mhz. Idea has purchased spectrum in key markets such as Gujarat, Maharashtra, UP (E) and UP (W) for 4G services. The surprising element is the purchase of spectrum in 2500 MHz band which practically has no compatible handsets in India currently, according to Bank of America, Merrill Lynch.
Idea now has mobile broadband (3G or 4G) footprint across all 22 circles with 3G capability in 15 circles and 4G capability in 20. Idea now has 4G capacity spectrum in 16 circles. Kotak is also surprised by the company’s bids in the 2500 MHz band, especially given the lack of a mature device ecosystem.
Vodafone
Vodafone has invested heavily in the 2500 MHz ban. CS is surprised on the distribution of the bids, especially the 2500 MHz bids by Vodafone and Idea, according to Credit Suisse.
Vodafone and Idea, who have thus far been offering 4G using FD-LTE technology on 1800 MHz band, bought 2500 MHz spectrum in the auction.
Vodafone India has considerably improved its overall spectrum holding in the auction, but still has 5 circles without 4G presence, according to Goldman Sachs.
Jio
Top 3 telecoms still lack a sub 1000 MHz 4G band, which Jio has, leading to likely purchase of 700 MHz in future as capacity utilization improves led by data growth. With 60 percent of the spectrum unsold, government may reduce prices of 700/900 MHz in future auctions to entice demand. Jio has largely focused on 2300MHz by buying 10MHz across most markets, according to Bank of America, Merrill Lynch.
In addition to acquiring spectrum in 16 circles in the 2300 MHz band to further expand capacity, Jio also managed to fill its 1800 MHz gaps in Bihar, J&K, Punjab and UP (West). The company expanded capacity in Haryana, HP, UP (East) and West Bengal. Jio renewed its spectrum (acquired from RCOM) in Gujarat- 800 MHz band.
Finally, top Indian telecoms have acquired more spectrum for supporting their mobile Internet strategy. Will established telecoms face more pressure in the voice and data market due to Reliance Jio? Will the spectrum purchase impact their Capital expenditures in coming years? We will be sharing more shortly.
Vina Krishnan
editor@telecomlead.com