Boosting Phone Networks: Government Set to Auction $11.6 Billion Worth of Airwaves

India’s federal cabinet recently greenlit a pivotal plan aimed at enhancing the quality and coverage of networks within the nation’s telecommunications sector, the world’s second-largest. The approved proposal entails the auctioning of airwaves, valued at a staggering 963.2 billion rupees ($11.6 billion) at reserve prices, as disclosed by India’s Ministry of Communications. These airwaves, spanning across eight bands—800, 900, 1800, 2100, 2300, 2500, 3300 MHz, and 26 GHz—totaling 10,523.1 megahertz, will be made available for bidding. Despite the announcement, the government has yet to provide a concrete timeline for the commencement of the auction.

The forthcoming airwaves auction holds significant promise, not only for bolstering government finances and narrowing the budget deficit but also for catalyzing advancements in telecom services and expanding coverage for consumers across the nation. Minister for Information & Broadcasting, Anurag Thakur, emphasized the positive impact the additional airwaves would have on telecom services, underscoring the potential to elevate service quality and extend coverage to previously underserved regions.

Moreover, the auction is poised to provide a substantial boost to major Indian wireless carriers, including Reliance Jio Infocomm Ltd., Bharti Airtel Ltd., and Vodafone Idea Ltd. These telecom giants, entrusted with serving a user base exceeding a billion, stand to leverage the additional spectrum to bolster their service offerings. Notably, the local carriers ventured into the realm of 5G services in late 2022, further fueling the ongoing data service boom sweeping across India.

The market, however, is locked into an oligopolistic structure, curbing one carrier’s ability to decide pricing. No operator can raise its tariffs unless its rivals do the same or it risks losing subscribers.“Spectrum auctions in India are always lapped up,” said Utkarsh Sinha, managing director of boutique investment firm Bexley Advisors.

But the fierce competition most companies are locked in is affecting their margins and can affect the ability and size of their bids for additional airwaves, he said, explaining that the pressure on profits can affect the ability and size of the companies’ bids.

In the last auction held in 2022, the Indian government raked in $19 billion with Reliance Jio emerging the top buyer spending more than $11 billion on airwaves.