Jio, Airtel set to gain market share after spectrum buys

The strengthening of spectrum footprints by Bharti Airtel and Reliance Jio in the just-concluded auctions is expected to yield market share gains for the two telcos, arming them with sustainable advantage in the long run and for 5G play, according to analysts.

With the auctions over, the key things to be monitored would be Vodafone Idea Ltd's (VIL) balance sheet and its potential capital raise, signals of price hike, launch of a Jio-Google smart phone, and 5G spectrum auctions, they noted.

Analysts across-the-board concurred with the government's view that at Rs 77,814 crore of total bids, the spectrum auction outcome and response had surpassed expectations.

Goldman Sachs noted that Bharti and Jio had "significantly" bolstered their spectrum footprints, and that strengthening of radiowave holdings "could aid their market shares while at the same time keeping capex under check".

In all service areas and bands, spectrum was sold at reserve prices, indicating that this higher-than-expected participation was a function of telcos looking to secure their medium-term spectrum needs rather than a result of a bidding war, it said.

With the spectrum auctions done, Goldman Sachs said it believes that investor focus will now shift to VIL's balance sheet and its potential capital raise, signals of tariff hike, launch of a Jio-Google smartphone, and 5G spectrum auction.The more-than-expected participation from telcos in the auctions increases the probability of a price hike as a way to offset increase in leverage, market watchers said.

"While the March '21 auction was largely a non-event for Vodafone Idea, the company's limited ability to participate in future 5G spectrum auctions (due to its stretched balance sheet) could result in further erosion of its market share," Goldman Sachs said.