In our view, telcos would acquire 2100 MHz spectrum to fill in their coverage gaps as no operator has pan India 3G spectrum. With the exception of Vodafone, we see less possibility of telcos looking to acquire 10 MHz of 3G spectrum in a circle.
Given that the defense is looking to free 3 bands of 2100 MHz (15 MHz) in coming months, we believe that telcos would be in better position to acquire 2100 MHz in the next auction round where we would see adequate 2100 MHz supply. Furthermore, as winning
price in this auction would be likely taken as reserve price for the next round, it would make sense for telcos to less aggressive in this auction. We note that on this round, spectrum in only 17 circles (and not pan India is being auctioned).
The risk which top 3 telcos face of not acquiring 3G spectrum in this round is that if some other telco acquires 3G in 17 circles then it would alter the competitive environment in the market. So to avoid such a scenario, existing telcos may look to acquire 2100
MHz in this round.
