Spectrum Auction Begins Today, Target 5.

6 Lac Cr
Show-stopper 700 MHz band:
The premium 700 MHz band is the show-stopper
with all eyes fixed on it. It is being put on block
for the first time. However, its sharp and steep
pricing could be a dampener. Any company
interested in buying spectrum in the 700 MHz
band will have to shell out a minimum of
Rs.57,425 cr for one block of 5 MHz on a panIndia basis. All together, a total of 2,354.55 MHz
of mobile airwaves frequencies are up for auction for the 700 Mhz, 800 Mhz,
900 Mhz, 1800 Mhz, 2100 Mhz and 2300 Mhz bands. All the airwaves being
auctioned can be utilized for high speed 4G services.

A total of 7 players:
Seven(7) operators are in the fray - Reliance Jio, Bharti Airtel, Idea
Cellular,Vodafone, RCom, Tata Teleservices and Aircel. RCom and Aircel,
which recently announced a merger, plan to bid separately in the upcoming
mega-spectrum auction. These telecommunication operators have deposited
Rs.14,653 cr as earnest money for the spectrum auction, with Reliance Jio
submitting the highest amount of Rs.6,500 cr. EMD or Earnest Money Deposit
is indicative of a firm's strategy to bid inspectrum bands and specific circles.
Telecommunication companies have to deposit close to 12 per cent of the
reserve price of the spectrum which they are likely to bid for.

Expectations of Analysts and Care Ratings:

Going by the earnest money deposits (EMDs), market analysts don't expect
aggressive bidding from the operators. Care Ratings are expecting a muted
response from the operators at the spectrum auction as they will look at
alternatives such as sharing of airwaves. Many telecommunication operators
are also reeling under high debts that may prevent them to bid aggressively.
However, Vodafone's cash injection of close to Rs.47,000 cr into its Indian unit
ahead of the spectrum auction and Reliance Jio's entry have raised some
positivity about the response to the auction.
As far as battling Jio is concerned, market analysts and industry players said
that nationwide premium 4G services were a must. Both Vodafone (ranking 2nd
in India) and Idea Cellular (ranking 3rd in the country) have 4G services in just
about half of twenty-two telecom circles.

Expectations of Finance Minister Arun Jaitley:

Reliance Jio and Bharti Airtel have nationwide offerings. However, both are
also expected to bid, largely to deal with volumes, raising prices and interest.
The success of the spectrum auction is vital for bridging the government's
Budget deficit. Arun Jaitley, Finance Minister, expects a revenue of
Rs.98,994.93 cr from communication services which encompasses proceeds
from spectrum auction and other fees.
The telecommunication companies winning spectrum have to pay 25-50 per
cent of the bid money upfront, depending on the kind of spectrum. The balance
has to be paid in a decade after a 2-year moratorium.

Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of the
research team. Users are advised to use the data for the purpose of information and rely on their own judgment while making
investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022

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Article Written by
Salman Hashmi