The strengthening of spectrum footprints by Bharti Airtel and Reliance Jio in the just-concluded auctions is expected to yield market share gains for the two telcos, arming them with sustainable advantage in the long run and for 5G play, according to analysts.
With the auctions completed, it would be key to monitor Vodafone Idea Ltd.’s (VIL) balance sheet and its potential capital raising, signals of price hike, unveiling of a Jio-Google smartphone, and 5G spectrum auctions, they noted.
Analysts across-the-board concurred with the government’s view that at ₹77,814 crore of total bids, the spectrum auction outcome and response had surpassed expectations.
Goldman Sachs noted that Bharti and Jio had “significantly” bolstered their spectrum footprints, and that strengthening of radiowave holdings “could aid their market shares while at the same time keeping capex under check”.
In all service areas and bands, spectrum was sold at reserve prices, indicating that this higher-than-expected participation was a function of telcos looking to secure their medium-term spectrum needs rather than a result of a bidding war, the firm said.
‘Tariffs may rise’
The more-than-expected participation from telcos in the auctions increases the probability of a price hike as a way to offset the increase in leverage, market watchers said.
“While the March ’21 auction was largely a non-event for Vodafone Idea, the company’s limited ability to participate in future 5G spectrum auctions (due to its stretched balance sheet) could result in further erosion of its market share,” Goldman Sachs said.
Moody’s Investors Service said spectrum renewals will help incumbents protect their market positions while additional bandwidth purchases will drive improved network coverage.