The telecom sector breathed a collective sigh of relief along with investors on July 18 following the release of details around the fifth generation spectrum auction to be held next week.
Analysts inferred that the Adani Group, which surprised everyone and created ripples in the sector when it made its intention clear to join the 5G spectrum auction, may not be a threat to incumbent telecom service providers after all.
Data released by the government shared the pre-qualified auction participants and the earnest money they deposited (EMD). Typically, bidders have a war chest of eight-10 times the earnest money.
Reliance Jio Infocomm has made an earnest money deposit of Rs 15,000 crore that allows it to bid for spectrum of up to Rs 1.5 lakh crore. Similarly, Bharti Airtel has made an earnest deposit of Rs 5,500 crore, while Vodafone Idea deposited Rs 2,200 crore.
All eyes were on the Adani Group whose plan to enter the auction was described as its ambition to build an enterprise network for its own use and not for consumer mobile services.
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However, investors and analysts were worried that a sizeable spectrum allocation to the group could have opened a pathway to a future venture into the consumer mobile services space.
The group’s earnest deposit was Rs 100 crore, which analysts believe will pose no threat to incumbent telecom operators.
“Abating concern of the Adani Group’s entry into the consumer mobility space, its small EMD hints at its low auction participation in a few circles,” brokerage firm Motilal Oswal Financial Services said in a note.
Brokerage firm CLSA India reportedly was surprised by the low deposit made, given that financially distressed Vodafone Idea deposited Rs 2,200 crore.
CLSA echoed Motilal Oswal Financial in observing that Adani Group’s participation in the spectrum auction, in view of its deposit money, poses no risk to telecom operators.
The fifth generation telephony is an upgrade on 4G, as it allows users to use more devices at a faster speed. It will allow the acceleration of the Internet of Things, industry 4.0, and augmented reality as its reliability and stability is higher than that of a 4G network.
Overall, analysts expect Bharti Airtel and Reliance Jio Infocomm to lead the race for 5G spectrum, as only they have shown ambitions to acquire pan-India spectrum. Vodafone Idea may be able to bid for only certain circles.
Brokerage firm Nomura Financial Advisory and Securities India said that the 5G rollout will only accelerate the market share gains for Bharti Airtel and Reliance Jio, however, it hopes that the easier payment norms will boost Vodafone Idea’s participation in the auction.
At 10.25 am, shares of Reliance Industries were up 0.1 percent at Rs 2,424 on the National Stock Exchange (NSE), while those of Bharti Airtel were higher by 0.8 percent at Rs 668. Shares of Vodafone Idea were up 1.7 percent at Rs 9 on the NSE.
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Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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