Reliance Jio 4G LTE Non-Starter – Bidding for 900Mhz Spectrum

February 19, 2015 · Author: · Category: telecom 

Mukesh Ambani mismanaged Reliance Jio Infocomm venture has miserably failed to take off even 5 years after getting the 2300Mhz BWA Spectrum.

As the countdown to the mega spectrum auction in March 2015 has begun with eight telecom operators having submitted applications to participate in the bidding process. While Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications participation was expected and is being led by compulsions of spectrum renewals, Reliance Jio is the surprise entrant with the highest earnest money deposit

Idea Cellular’s EMD is only 40% higher than required for its renewals versus 2.1-2.5x by Vodafone and Bharti Airtel. Given the high EMD’s by three other operators, Idea’s 900MHz spectrum will be at risk of high price escalation and/or loss to competitors. The 900MHz and 2100MHz spectrum reserve prices are already ~10% higher than market prices discovered in February 2014 and 2010 auctions respectively. Though this auction includes one block of 3G in 2100MHz in 17 circles it is unlikely to aid in softening bidding for 900MHz. For 2100MHz another auction is likely in future with three pan India blocks once defence vacates the same.

Reliance Jio Infocomm is back in auctions for the maximum available 900MHz spectrum given the miserable failure by Mukesh Ambani on 4G service rollout. This along with bunched up renewals in 900MHz spectrum, especially for Idea could redefine the competitive landscape of the sector. Reliance Jio will need to spend Rs168/US$2.8bn at reserve price for pan India 900MHz taking its 4G project cost to ~US$15bn even before launch. Are Reliance Industries shareholders watching how their CMD is squandering their wealth ?

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