Spectrum Auction: Vodafone Idea may not bid for new airwaves, given funding crunch

Vi reported that its net loss narrowed to Rs 6,986 crore in the December quarter

Vodafone Idea (Vi) is unlikely to bid for new spectrum in the upcoming auction and will only renew airwaves that are expiring in the Uttar Pradesh (West) and West Bengal circles, analysts said.

“There is a chance that they may not even bid in this auction. Given Vi's balance sheet constraints, it is difficult to envisage any major spending by them,” Vivekanand S, an analyst at Ambit Capital Research, told Moneycontrol on February 12. “Vi doesn't have money and may not bid for spectrum other than renewals.”

He said the requirement for Bharti Airtel and Reliance Jio would be very marginal because they already have lots of spectrum. Vi's spectrum renewal is due in the 900 MHz in West Bengal and Uttar Pradesh (West) circles, worth over Rs 1,950 crore.

The notice inviting applications for the auction and the payment terms would decide Vi’s strategy, an analyst said on condition of anonymity.

“...both Uttar Pradesh (West) and West Bengal are key priority circles for Vodafone Idea, and it will look at renewing the licence to secure revenue market share. It will be a small amount, and they can manage it,” the analyst said.

For Airtel, spectrum renewal is due in Uttar Pradesh (East), Uttar Pradesh (West), West Bengal, Assam, Bihar, Jammu and Kashmir, and Odisha.
On February 8, the cabinet approved the auction of 10,523.15 MHz of spectrum across bands at a reserve price of Rs 96,317.65 crore.

Spectrum extension

It approved fresh spectrum allotment to Bharti Airtel and Vi until the auction is conducted to avoid any disruption in telecom services. In the interim period, Airtel and Vi can continue to use the spectrum by paying the price determined at the previous auction.

Last week, the Department of Telecom gave a three-month extension for Airtel’s expiring spectrum. The Sunil Mittal-led telco paid Rs 35 crore for the extension.

Vi has also received a letter from the telecom department for a similar extension and paid for the UP West circle. "Vi will pay for West Bengal Circle closer to its due date. It is 6.2 MHz in UP West and 4.4 Mhz in West Bengal in the 900 MHz band," a source familiar with the matter told Moneytcontrol.

An email query sent to Vi remained unanswered.

Experts said Reliance Jio and Bharti Airtel may only bid a little because their requirement for spectrum, especially for 5G, has been fulfilled. Adani Data Networks may buy some spectrum, but not aggressively.

Vi and Adani Data Networks still need to meet minimum rollout obligations related to the 5G spectrum. Vi acquired spectrum in 3300 MHz and 26 GHz 5G bands in the auction in 2022.

In January, the DoT sent notices to both companies asking them to furnish the reasons for the delay and the timelines for starting 5G services.

On January 30, Vodafone Idea said it will need 6-7 months to roll out 5G services after securing funding, for which discussions with investors are underway. During the company's earnings call, the ailing telco’s CEO, Akshaya Moondra, said Vi was in talks with vendors for the 5G rollout and developing use-cases.

Vi reported that its net loss narrowed to Rs 6,986 crore in the December quarter, helped by Rs 755.5 crore one-time exceptional gain, while average revenue per subscriber improved. Without funding, the telco is walking a tightrope as debt of about Rs 5,400 crore comes up for payment in the next financial year, including Rs 533 crore for spectrum and about Rs 3,200 crore of bank debt.