Will 900 mhz spectrum decide future role play in telecom industry?

So is there going to be a fierce battle for the precious 900 mhz spectrum band in the February auctions or not? The Department of Telecom (DoT) has decided to offer only 46 mhz spectrum in this band across three circles - 16 mhz each in Delhi and Mumbai and 14 mhz in Kolkata - and nothing in any of the remaining 19 circles. This spectrum band was earlier expected to be the hot potato since incumbent telcos like Bharti and Vodafone were seen bidding for it to retain their licenses in key circles. Also, new bidders like Reliance Jio were expected to bid for this spectrum aggressively, pushing up spectrum acquisition costs for all players.

But now, Rajan Mathews of Cellular Operators Association of India (COAI) - which is a GSM industry lobby group - has told analysts that 900 mhz spectrum does not have a very good eco-system for LTE currently and could be of more interest to renewal licensees rather than new entrants. Mathews said this in an interaction with analysts hosted by Motilal Oswal last week. Is this what the GSM biggies like Bharti and Vodafone wish for or will Reliance Jio and others be more interested in 1800 mhz spectrum band, leaving the precious 900 mhz band for incumbents? If what Mathews says is true, the auctions may actually see rational bidding and market fears about Reliance spoiling the auction party may come untrue.

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[caption id=“attachment_1343345” align=“alignleft” width=“380”]  Representational image. Reuters[/caption]

As per earnest money deposits made by telecom companies last week, only three players will be bidding for 5 mhz spectrum pan India in each in the two spectrum bands. These are Bharti Airtel, Vodafone and Reliance Jio. Hence the significance of Mathews’ assertion.

Reliance Jio has emerged as a serious challenge to Bharti and Vodafone because apart from the two established players, Reliance will be the only company to become eligible for bidding for spectrum in 1800 and 900 mhz bands in all of India’s 22 telecom circles. The company has pan-India 4G spectrum already but has not begun services; it is widely expected to offer voice and high speed data services later this year, after acquiring additional spectrum through the February auctions.

Mathews also said that indications point to Reliance Jio being close to launch. “We believe the launch of operations by Reliance Jio is likely getting closer given 5-year rollout obligations associated with the BWA spectrum won by Reliance Jio in 2010, recent infrastructure sharing agreement with Bharti Airtel and several media reports indicating accelerated pace of network expansion etc.”

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Analysts have earlier said that Reliance Jio may bid for all three circles for 900 mhz spectrum. Only two bidders can succeed in getting 900 mhz spectrum in Kolkata since only 14 mhz is being put up for auction and 5 mhz is the minimum a player must bid for. In Delhi and Mumbai though, three players may successfully bid for this spectrum since 16 mhz each is available. Reliance may be in direct competition with Bharti and Vodafone in the Delhi and additionally with Idea in the Mumbai circles for 900 mhz.

So will the 900 mhz spectrum band decide the future role play in telecom industry?