DoT's 2nd 5G spectrum sale worth ₹96,000 cr starts; key points

The second round of the sale of 5G spectrum by the Department of Telecom (DoT) will start today, where top telecom services providers like Reliance Jio, Bharti Airtel, and Vodafone Idea (Vi) will bid for the 5G airwaves.

The 5G auction is set to boost existing telecom services and maintain the continuity of services. DoT, in a statement today, said: "It is in line with the government’s commitment to facilitate affordable, state-of-art high-quality telecom services to all the citizens."

There are a total of 10,522.35 MHz or 10.5 GHz of 5G airwaves being put on sale today, valuing ₹96,238.45 crore at reserve prices. The current spectrum sale comes after the first mega 5G spectrum auction of 72 GHz in July 2022.

Mock auctions in this regard were conducted on June 3, 2024, June 13, 2024, and June 14, 2024, to familiarise the bidders with the e-auction platform.

The spectrums up for bidding are 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz and 26 GHz.

For the 5G spectrum auction, earnest money deposit (EMD) of ₹4,350 crore has been deposited by three telecom players, which could mean a total bid amount of ₹52,200 crore based on a maximum limit of 12x the EMD amount.

What's on offer this time?

Process: The auction will be a simultaneous multiple-round ascending (SMRA) e-auction.

Duration: Spectrum will be assigned for a period of twenty (20) years.

Payment: Successful bidders will be allowed to make payments in 20 equal annual instalments, duly protecting the NPV at the interest rate of 8.65%.

Surrender: Spectrum acquired through this auction can be surrendered after a minimum period of 10 years.

Spectrum usage charge (SUC): There will be no spectrum usage charges (SUC) for the spectrum acquired in this auction.

Bank guarantees: It is not required by the successful bidder to submit a financial bank guarantee (FBG) and performance bank guarantee (PBG).

Reserve price: The reserve price of the expensive 800 MHz and 900 MHz bands remains the same as that of the 2022 auction in all the priority circles.

3300 MHz price up: The price in this band has been increased by 12% across all the telecom circles. In the case of 1800 MHz, the price has increased in 10 circles including Gujarat, Kolkata, Maharashtra and Mumbai where it has gone up by 12%. The price of 2100 MHz has also gone up by 12% in the Delhi, Gujrat and Karnataka circles.

Analyst view

Analysts at Antique Stock Broking Ltd say they do not expect any player to bid aggressively at the auction. They expect Bharti Airtel is likely to bid for some of its expiring spectrum worth ₹3,820 crore, while Jio will be selective and will base its bidding on data traffic flow in individual circles, and VI will be limited by its EMD deposit and may only bid for the expiring spectrum or the 26 GHz band to lower SUC cost."

The brokerage has maintained a "BUY" rating on Bharti Airtel, with a target price of ₹1,590 as it is poised to benefit from the tariff hikes in the near future and in FY27 and higher FCF due to declining capex intensity.