900 MHz spectrum remains a major factor along with the incumbency factor for market leadership in various circles. Idea holds 900 MHz spectrum in 9 service areas covering ~48% of national revenue and ~72% of Idea’s revenue. The following Chart Shows Idea Cellular’s Revenue in Circles of 900MHz
Though upcoming renewal of 900 MHz spectrum remains a key risk for Idea, we expect that the company would like to retain the entire 900 MHz spectrum by participating in the auction process.
Spectrum renewal/re-farming cost for Idea between 2014 and 2016 should be around Rs154bn. In the worst case, if the company is not able to retain the entire 900 MHz spectrum then the network operating cost in the particular service areas will increase by ~1.5-2x, which will be partially offset by lower regulatory cost.