In past, I had written about the operators bidding strategy based on information available at that point in time. Today, DoT has declared the value of the EMD (Earnest Money Deposit) submitted by operators. What is an EMD? This is almost similar to buying chips in a casino for the purpose of making a bet. The higher the value of the EMD more flexibility the bidder will have, to not just bid across all bands, but also to take a large quantum of spectrum. In this note, I am revising my earlier estimates based on the submitted EMD. However, I will like to inform the readers that this is just an attempt to give the most realistic estimate of what the operators can bid in case they decide to consume all their submitted EMD. It does not mean that they will bid on such numbers. Actually, they might decide to bid much less — which we will come to know only after the auctions are over.
Bidding Matrix
Following in the bidding matrix for all the operators based on their submitted EMD. Note all these spectrum numbers are in MHz and on a Pan India basis.
Note — a) RJIO’s EMD empowers it to bid 2x15 MHz of 700 MHz, 100 MHz of 3.5 GHz, and 800 MHz of 26 GHz bands. The rest of the numbers are as per the earlier estimate in my note.
b) Bharti’s EMD empowers it to bid 80 MHz of 3.5 GHz, and 800 MHz of 26 GHz, and it might skip 2100 MHz, and the rest of the numbers are based on earlier estimates in my note.
c) VI’s EMD empowers it to bid 40 MHz of 3.5 GHz, and 400 MHz of 26 GHz, and it might skip 2100 MHz and 2500 MHz bands, and the rest of the numbers are based on earlier estimates in my note.
d) Adani’s EMD empowers it to bid 100 MHz of 26 GHz band Pan India.
EMD Matrix
Following in the EMD matrix based on the above-estimated bidding scenarios. The units are in Rs Cr.
Note that the calculated EMD is slightly higher than their submitted EMD except for Adani. This means the spectrum that they will end up taking will be slightly less than what has been estimated in Figure 1.
Operator’s Outflow
Based on the above estimates, the total outflow for the operators is as under. The units are in Rs Cr.
Possible Biding Scenarios
Here are the possible bidding scenarios based on my earlier estimates. EMDs submitted by Bharti and VI, Adani almost match with Moderate, Conservative, & Conservative bidding scenarios respectively which I prepared earlier. Only RJIO’s EMD numbers are way off from the scenarios estimated below.
Conclusion
Based on the EMD submitted the total outflow of all the operators put together is Rs 1.96 Lakh Cr. But will the operators bid these numbers? We will know that only at the time of the auctions. If RJIO bids 2x15 MHz of 700 MHz, then it will end up driving a huge competitive advantage for itself in the short and medium term. Bharti will have no option but to bid for 600/700 MHz in the next available opportunity. VI will be significantly disadvantaged, and Adani will have to think many times before attempting to enter the consumer fray. Hence, given this possibility, this auction might turn out to be a watershed auction — impacting the Indian telecom sector’s competitive dynamics for a long time in the future.
For further playing with these numbers please use the tool embedded in the following link.
(Views expressed are of my own and do not reflect that of my employer)
PS: Find the list of other relevant articles in the embedded link.
