India’s top four operators – Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications (RCom) – may hesitate to bid for 700MHz spectrum in the next auction, given their stretched balance sheets and need to beef up their 4G networks with newcomer Reliance Jio just a month away from a nationwide 4G launch.

The regulator last week set a base price for the band at a huge $1.7 billion per megahertz.

Fitch Ratings said the 700MHz auction planned for May or June may not attract the major operators that now own alternative 4G spectrum in the 850MHz, 1.8GHz and 2.3GHz bands.

Market leader Airtel, for example, owns about 40 per cent of the 900MHz airwaves held by private companies, and will offer 4G services in 1.8GHz and 2.3GHz bands. Reliance Jio, after investing about $15 billion on 4G spectrum and networks, has access to the 800-850MHz bands in all of the country’s 22 service areas.

In the last auction, not quite a year ago, operators spent a record $17.7 billion.

Fitch believes operators will now be less inclined to invest heavily in the 700MHz band. In addition, new regulations that allow spectrum sharing and trading could make bidding in the auctions less attractive.

The agency has a negative outlook on Indian operators for 2016. It expects competition to intensify with Jio’s entry and the market to consolidate.

In October RCom and Sistema Shyam Teleservices, which operate in India under the MTS brand, announced plans to merge via a stock swap.

RCom and Jio recently finalised a spectrum sharing and trading alliance that will see RCom sell 800MHz spectrum in nine regions to Jio and both share bandwidth in the same band in 17 service areas. And Airtel reportedly is near to closing a deal to buy 4G spectrum from Aircel.

Fitch said blended ARPU could fall by 5-6 per cent to INR160 from INR170 ($2.35-$2.50) last year due to a decline in data tariffs, which will more than offset the rise in data usage. And the top four operators’ average operating EBITDA margin will likely narrow 1-2 points from 35 per cent last year due to competition and greater marketing spend.