A lack of available spectrum in the 900MHz band is likely to see operators overbid for licences in India’s spectrum auction in February, leading to a rise in call prices, according to Morgan Stanley.
In a research note cited by The Economic Times, the investment bank forecast that premium bandwidth could cost as much as four times that of the 1.8GHz spectrum auctioned in February.
Although 900MHz spectrum usually allows for lower capital expenditure and higher margins, Morgan Stanley said limited availability is likely to result in overbidding.
Call rates could increase by as much as 10 per cent as a result of the higher potential prices being paid to secure licences. This level of increase would cover the rise in interest and depreciation costs associated with the higher licence fees.
In April, the government announced plans to auction airwaves in two frequency bands early in 2015.
The 900MHz sale will be held due to 20-year licences expiring, while spectrum in the 1.8GHz band that failed to sell earlier this year will also be up for grabs.
Morgan Stanley said Bharti Airtel is the best-placed operator ahead of the auction, with good coverage in the 1.8GHz and 2.1GHz bands in the circles where it faces renewal of 900MHz spectrum. Idea Cellular, Vodafone India and RCom are less well-placed.
India’s Department of Telecom (DoT) previously rejected the telecoms regulator’s recommendation that next year’s spectrum auction be expanded because the additional spectrum bands suggested — specifically 800MHz and 2.1GHz airwaves— are unlikely to be available in time.
However, the DoT said earlier this month that it aims to provide clarity on key issues such as spectrum sharing and trading ahead of the auction.
The DoT only recently assigned the 1.8GHz spectrum won by five operators in the auction back in February this year.
Vodafone India had formally requested the immediate allocation of the airwaves it had secured in the auction and paid for in March.
In September Bharti Airtel reportedly demanded compensation from the country’s government to cover the interest on money it borrowed to secure spectrum to which it had not yet received access.