The Idea-Vodafone combined entity was exceeding the limit in Maharashtra, Gujarat, Kerala, Haryana and Uttar Pradesh (east). These markets account for 32 per cent of the total Indian mobile market and the merged entity has a leadership position in all of them. “The ability to retain spectrum aids its competitive position,” Deutsche Bank said in the report. According to estimates, the total spectrum holding of Airtel is 2,200 megahertz (MHz), Idea-Vodafone combine is 1,860 MHz and Reliance Jio (including Reliance Communications) around 1,650 MHz.
Morgan Stanley said the deferred spectrum payment tenure would provide some relief for operators in the near term. “Airtel's annual spectrum payments would decline by Rs 14-17 billion,” Morgan Stanley said.
During the last three auctions, the government had allowed payments for spectrum bids as a combination of upfront amount (25 to 33 per cent of the bid) and the balance via 10 annual installments after a two year moratorium. The new policy extends the installments to 16 years.
Goldman Sachs said the increase would aid consolidation and help Idea the most, and potentially Jio as well. “Idea and Vodafone, as per earlier regulations, had 45.4 MHz of excess spectrum across all service areas put together (2.5 per cent of total spectrum), which they would have had to surrender, given the previous government’s merger and acquisition guidelines,” it said in a report.
The excess spectrum was in the bands of 900 MHz and 2,500 MHz, and worth around $800 million at current market prices. With the increase in caps, such spectrum could be retained by Idea, Goldman added. It also said the relaxation of the spectrum cap could make it easier for smaller operators, including Aircel, to sell their spectrum to incumbents, and also help entities in the middle of a merger and acquisition to retain spectrum. RCom, for instance, has announced the sale of some assets to Jio, but continues to retain some of the spectrum in the 800 MHz band. Earlier, the sale of such 800 MHz spectrum would have breached Jio’s spectrum caps of 50 per cent.
“None of Bharti’s (Airtel) ongoing acquisitions breach any spectrum caps, excluding un-liberalised spectrum, but the increase in spectrum caps could provide Bharti with capacity to acquire some of Aircel’s spectrum, if the latter were to sell them,” Goldman said.