Indian operators may have to pay Rs 1 lakh crore for spectrum: Crisil

Indian telecom service providers may have to shell out Rs1 lakh crore (Rs 1 trillion) to acquire spectrum at the forthcoming auctions, which is expected to take place in the next two - three months, according to a report by Crisil.

Of this nearly 75 per cent will be spent by private telecom operators.

''Our view is based on an analysis of circle-wise market position and spectrum holdings of operators, the trends and stupendous growth projected in data usage, and the likely competitive scenario,'' Crisil said in a statement.

In the current fiscal, the outgo towards spectrum acquisition would be Rs37,000 crore, which is lower than the budgetary estimates of about Rs 56,000 crore. It will still be a significant outgo for an industry reeling under Rs 4 lakh crore of debt as of March 2016.

The government plans to put on the block over 2,300 MHz of spectrum across 7 frequency bands at the forthcoming auction – the highest quantity of airwaves that's being sold at one go. Even though the dates of the auction are yet to be announced, the industry is expecting it to take place in the next 2-3 months.

''Unlike previous auctions, operators this time do not face business continuity issues. Yet we expect reasonably healthy participation because incumbents will ramp up their 3G and 4G spectrum holdings ahead of Reliance Jio's entry. Telcos are already facing increased network congestion in circles with high data consumption (mainly metros and Category A circles, which account for ~60% of India's data traffic), and therefore, augmenting network capacity and spectrum holdings will be critical for maintaining their competitive position. Overall, telcos are expected to fork out about Rs 1 trillion,'' said Ajay Srinivasan, director, Crisil Research.

''We expect bidding in 700 MHz to be extremely selective with players preferring the less pricey 1800 MHz. About half of the spectrum put on the block in 1800 MHz and 2100 MHz, and most of it in 800 MHz and 900 MHz, would be lapped up, while bidding interest in 2300 MHz and 2500 MHz is expected to be limited,'' he added.

The top three telcos (Bharti Airtel, Vodafone India and Idea Cellular), who together account for three-fourth of the sector revenues, are expected to account for 55-60 per cent of the total spending at the auctions. The aggression of individual operators in bidding will be influenced by their 3G/4G spectrum holdings in key circles and quantum of contiguous spectrum held.

''The large telcos are cumulatively likely to spend Rs 1.2 lakh crore over the course of the current and next fiscal on spectrum payouts as well as network augmentation. With profitability and operational cash flows of the sector projected to come under pressure with the launch of Reliance Jio's services, the reliance on external funding is set to increase. Our analysis shows they would need external funding of around Rs 0.5 trillion to meet their spectrum and network investments over the next 2 years,'' added Srinivasan.