Idea may spend $1.3 billion to buy data spectrum in upcoming auction

KOLKATA: Idea Cellular may splurge awhopping $1.3 billion ( Rs 8,627 crore approx) in adding data spectrum in key markets in the upcoming auction around July while market leader Bharti Airtel may selectively buy 4G airwaves in the coveted 700 Mhz band in a few circles, where it is cheaper than 900 Mhz spectrum, brokerage HSBC said. "Idea may add more data capacity in four circles and we see a potential spend of $1.3 billion in the upcoming spectrum auction by the company," said HSBC analyst Rajiv Sharma in a note, without naming the markets.

Analysts, however, expect India's No 3 mobile carrier to cherry pick data spectrum in its leadership circles like Maharashtra, Kerala, Madhya Pradesh, UP-West, where the company has seen a sharp surge in incremental revenue market share (RMS) over the past one year. In a recent earnings call, post-announcement of its fourth quarter results, Idea pegged its capex guidance for FY17 in the Rs 6,500-7,000 crore range, Bank of America Merrill Lynch said in a note.

On Bharti Airtel's possible spectrum strategy, HSBC said the Sunil Mittal-led telco may selectively add 700 MHz airwaves in markets where it does not have liberalised 900 MHz spectrum for 3G. "Bharti Airtel may add 700 Mhz spectrum in a few markets where it is either priced at par or lower to 900 MHz spectrum as it could help the company address indoor data coverage issues, especially where it cannot use 900 MHz airwaves for 3G deployments," said brokerage HSBC.

The Telecom Commission-approved base prices of 700 Mhz spectrum in UP-East, UP-West and Bihar are at Rs 459 crore, Rs 384 crore and Rs 248 crore. These are well below the reserve price of 900 MHz spectrum in the same circles, which are at Rs 776 crore (UPEast), Rs 739 crore (UP-West) and Rs 444 crore (Bihar).

At present, Bharti does not have any 900 Mhz spectrum in key markets like Maharashtra, Gujarat, Kerala, Haryana and MP. It also does not have liberalised 900 MHz spectrum in UP-East and UP-West where it runs 3G on the traditional 2100 Mhz band.

In a recent earnings call, a day after reporting results for the January-March quarter, Bharti Airtel had hinted that despite its comfortable spectrum holdings, it might look at adding 3G spectrum selectively for capacity as 3G is relatively better than 4G on availability of a (devices) ecosystem and margin profile as it allows the company to leverage its existing 2G infrastructure. Former Bharti Airtel CEO Sanjay Kapoor, however, said aggregating spectrum across too many bands, in small quantities, could create customer experience challenges. "Finding affordable mass-market smartphones supporting so many bands for specific geographies may not be easy.

Hence such spectrum aggregation would call for choices between capacity creation and customer experience," said Kapoor.