With 15.8% increase in 900MHz spectrum price in UP (East) circle, there was demand for 800MHz spectrum in the same circle for the first time in the current auction process. This could possibly be due to incumbent operators looking for back up in 800MHz spectrum if 900MHz prices escalate above their comfort zone. Apart from this, there was some activity in Bihar, Madhya Pradesh and North East circles, where prices jumped 1.0%, 3.0% and 2.0%, respectively. In the 1800MHz band, prices increased in only Himachal Pradesh, UP (East) and UP (West) circles by 1.0%, 6.0% and 1.0%, respectively, leading to an overall rise of 0.4%. There was no excess demand for 800MHz, 1800MHz and 2100MHz spectrums.
Days 15 and 16 had seen spurt in demand for 900MHz spectrum in Rajasthan, UP (East) and UP (West) circles. On day 17, this demand was sustained with 18.0%, 15.8% and 5.0% price hikes, respectively. There was demand for Bihar circle as well, where price increased 10.3%. Overall, on day 17, price for 900MHz spectrum increased 3.9%, taking the total rise over reserve price to 105.6%. Excess demand in this spectrum is now limited to the UP (East) circle. Bharti?s and Idea?s cost of replenishing entire spectrum stands at INR172.7bn and INR305.9bn, 81.4% and 86.1% higher than the reserve prices, respectively.
We believe sustained increase in prices of 900MHz in crucial circles may lead to more compromises for incumbents such as lesser renewal spectrum and buying for less efficient spectrum. Of the 4 circles that clocked spurt in activity, Rajasthan is a must-win circle for Bharti and UP (West) is must-win for Idea
