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Reliance Jio wins against Bharti Airtel, Vodafone in TRAI spectrum auction recommendations

traiOne of the most keenly fought battles during the Telecom Regulatory Authority’s consultation over upcoming spectrum auction has been won by Reliance Jio. On the losing side are India’s top two operators — Bharti Airtel and Vodafone.

The battle was on the question of whether or not Reliance Jio should be allowed to top up its 2300 MHz 4G spectrum in the upcoming auction.

The 2300 MHz band is the primary band of 4G services in India.

It is used by Reliance Jio across India, and by Bharti Airtel in eight circles. Due to the greater spectrum alloted (15 MHz vs 5 MHz), this band technically provides three times the download capacity compared to the competing band of 1800 Mhz (used by Idea).

If Jio could buy another small chunk of this, it could increase its network capacity by 50%.

The TRAI recommendation is also good news for Aircel Cellular, which has now gained an upper hand in its spectrum trading negotiations with Bharti.

MINIMUM BID SIZE

The fight boiled down to what should be the minimum bid size in this band.

If the minimum bid quantity was to kept at 20 MHz — as it was earlier — then Jio will not be able to bid as it already held 20 MHz out of the total 60 MHz available in the band. Under Indian rules, no operator can own more than 50% of the spectrum in any band, and Jio buying another 20 MHz would have violated this rule.

Not surprisingly, therefore, the other operators were unified in their stance that minimum bid size be kept at 20 MHz.

However, Jio argued that the particular reason for keeping the bid size at 20 MHz — avoiding wastage through splintering of spectrum — was no longer valid because of technological developments.

It argued that if the adjacent 4G networks were ‘synchronized’ with each other, there would be no wastage of spectrum even if sold in 10 MHz chunks.

Others, including Bharti Airtel, opposed this view.

In fact, Airtel’s opposition showed that it was willing to give up a chance to top up its own holdings in the band from 20 MHz to 30 MHz in eight circles in return for the guarantee that Jio will not be able to bid against it in the remaining 14 circles.

However, TRAI has decided to go with Reliance’s argument. In its recommendations, it said:

“If the network clocks of adjacent networks in 2300 and 2500 MHz bands are synchronised and all TSPs operating in these bands using the same frame structure, there will be no need for any guard band.”

In addition, TRAI also pointed out that using new technologies like carrier aggregation, companies can combine a small bit of 10 MHz with their existing allocation in other bands to enhance capacity.

Idea, for example, has zero allocation in 2300, but lots of it in 1800.

“With the technological development, TSPs are able to provide services using same technology by using multiple bands (800 MHz, 1800 MHz, 2300 MHz etc). Lower frequency bands are primarily used for the coverage purpose while higher frequency bands such as 2300 or 2500 MHz bands are mainly used for capacity enhancement. Therefore, TSPs having spectrum in other bands may like to have a smaller block of 2300/2500 MHz band for capacity augmentation.”

In addition, TRAI was also cognizant of the fact that bidding is likely to be more ‘productive’ (as far as the rise in prices are concerned) if existing players like Jio are allowed in.

“A block size of 10 MHz in these bands will help to enhance competition as existing licensees having spectrum in 2300/ 2500 MHz bands will also be able to take part in the auction. As mentioned above that in case of synchronised TDD operation, it is feasible to allot spectrum in blocks of 10MHz.”

IMPACT ON BHARTI AIRTEL-AIRCEL SPECTRUM DEAL

The immediate impact of TRAI recommendations, which are unlikely to be overturned by the Department of Telecom, is that it has increased the attractiveness of Aircel’s spectrum in eight service areas.

Aircel has been trying to sell its spectrum in these circles, primarily to Bharti Airtel. However, valuations have been a point of friction. Airtel was wondering if it wouldn’t be cheaper to buy the spectrum it needs in these eight circles from the auction instead of from Aircel.

With the TRAI recommendation being what it is, Airtel is unlikely to be able to get this spectrum at cheap rates from the auction due to the presence of Jio.

IMPACT ON VODAFONE

Another player strongly impacted is Vodafone, which was also planning to try its luck in the band. The company even made a counter comment against Jio’s suggestion of a 10 MHz slot.

On a 10 MHz network, “operators will not be able to provide users with significant improvement in user experience over that can be delivered over 3G and hence will not be encouraged to deploy in this spectrum. Further, the need for new radio and synchronisation solutions will make deployment in 10 MHz of TDD spectrum less attractive to operators,” it said.

However, if Bharti ends up buying Aircel’s spectrum, it will have 2300 airwaves in 16 out of the 22 circles in India. In these 16 circles, there is a chance that it may not bid for any more of the spectrum, which could help Vodafone snap up a 10 MHz chunk in these areas. Without the Aircel deal, it would have had to go head to head with Bharti in eight of these sixteen circles.

Finally, the increasing competition in the 2300 band is likely to force Vodafone to look at alternate bands such as 2500 or 700.

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