Why Airtel / Vodafone / Idea Won’t Overbid in 2015 Mega Spectrum Auction ?

2015 900Mhz Spectrum Auction 8 operators have submitted applications to participate in the bidding for the 2015 Mega Telecom Spectrum Auction. Reliance Jio is the surprise entrant with highest earnest money deposit (EMD) thus creating the fears of aggressive bidding. Idea cellular will be the most vulnerable if Reliance focuses on winning the 900MHz band Idea doesn’t have enough fire power to bid up if the process turns aggressive as the capability is limited by the EMD paid and may have to take an alternative path to the 2100 Mhz spectrum.

Why will Airtel / Vodafone and Idea Cellular Avoid Overbidding ?

I will renew my 900 MHz renewal spectrum at any cost is a dangerous mindset/messaging that the incumbents need to guard against. If adopted, such a mindset plays straight into the hands of the non-renewal operators, some of whom are sure to use this mindset to jack up renewal payouts for the incumbents.

In order to maximize revenues, the Narendra Modi led Government has designed the Auction process in such a way that a non-serious operator can jack up prices for the renewal operators. The only way the renewal operators can protect themselves is by sending out a clear signal to the non-serious predatory bidders that their bidding would be based on business case and they are willing to be priced out (lose renewal spectrum) if prices rise to levels that cannot be justified even with stretched assumptions.

However, we feel the situation of OVERBIDDING will not arise as Reliance Jio will surprise every body by bidding for the the most efficient 800MHz band as explained here.

The reserve Price levels do not make any sense for incumbents and without an element of doubt they cannot make business sense for other operators. Thus we believe operators will pick up Spectrum in various bands that will fit into their strategy of moving from Voice to Data networks.