With lower profit, how much can Vodafone Idea invest in upcoming 5G spectrum auction?

Reliance Jio and Bharti Airtel are the only two Indian telecom players with free cash flows and profits. The third private telco which is Vodafone Idea (Vi), has not made a single rupee since the merger happened.

It is unlikely that VIL (Vodafone Idea Limited) will invest heavily in the upcoming spectrum auction. All the analysts have discounted the chances of Vi participating in the 5G spectrum auction in the same capacity as Bharti Airtel and Reliance Jio.

According to JP Morgan, there will be no bidding war given that there is 330 MHz of airwaves in the 3300 MHz band available in each circle, whereas an operator only needs 100 MHz for the PAN-India rollout of 5G services.

There are therefore more than required airwaves available.

Motilal Oswal said since the government is looking to hold spectrum auctions annually, there are fewer chances that the telcos will bid heavily for airwaves in the upcoming auction, which has spectrum set at a quite high reserve price.

There are chances that the majority of the airwaves go unsold in the upcoming auction. The telcos can then get more airwaves next year, as the government will have no choice but to cut the reserve price if the telcos bid in a mild manner.

Vodafone Idea (Vi) is trying to raise money, but it won’t be possible for the telco to do so before the government takes its equity stake in the company. Ravinder Takkar, CEO of Vi, had earlier said that they are close to raising Rs 20,000 crore.