India has a surprise fourth entrant, Adani Group, in its 5G spectrum auction scheduled to be held later this month. So now, Reliance Jio, Bharti Airtel, Vodafone Idea and Adani Group will be participating in the spectrum auction set to begin on July 26.
Adani Group says that it plans to use the spectrum to build private networks for its own several businesses spread across the country. Adani Data Networks, part of Adani Group, has applied for Unified License with authorization of National Long Distance (NLD) and International Long Distance (ILD) for pan-India service and Internet Service Provider license for the Gujarat circle (service area).
“We are participating in the 5G spectrum auction to provide private network solutions along with enhanced cyber security in the airport, ports and logistics, power generation, transmission, distribution and various manufacturing operations,” said the statement issued by the Adani Group.
Impact on the auction
As per declarations provided by the four applicants, Bharti Airtel has declared a net worth of INR 758.87 billion ($9.51 billion) as of March 31, 2022, and a paid-up capital of INR 27950 million ($350 million). On the other hand, Reliance Jio’s net worth is INR 1970 bn ($24.69 billion) and paid-up capital of INR 1540 billion ($19.3 billion). India’s third-largest service provider, Vodafone Idea declared it had a negative net worth of INR 809,180 million ($10,143 million) with a paid-up capital of INR 321.190 billion ($4 billion).
As per the declaration, Adani Data Networks has a net worth of INR 2480 million ($31.1 million) but the parent Adani Enterprises has a net worth of INR 47,310 million ($593 million). The company has requested the government to consider Adani Enterprises' net worth for deciding the eligibility criteria for the auction.
Before Adani made the surprise announcement of participating in the 5G spectrum auction, the bidding in the auction was likely to be muted because of the high base price. However, in spite of the fact Adani Group plans to use the spectrum only for its enterprise network, the entry in the auction is likely to lead to intense bidding for the spectrum.
Vodafone Idea is likely to be the most impacted by Adani’s entry. Intense bidding means that the rates will shoot up, making it tough for Vodafone Idea to acquire 5G spectrum. The precarious financial position of Vodafone Idea means that it may not be able to match the high rates. However, there is speculation in the market that Adani’s entry in the auction may finally lead it to acquire Vodafone Idea, finally leading to its entry in consumer mobility.
The entry of Adani Group is reminiscent of Reliance Jio’s entry in the telecom space in 2010. In a surprise move, Mukesh Ambani-led Reliance Industries had acquired HFCL’s Infotel Broadband immediately after the Broadband Wireless Access (BWA) auction to get pan-India 4G spectrum. The sector is only now emerging from Jio’s dramatic entry. The presence of another player with deep pockets is sure going to give sleepless nights to Bharti Airtel’s senior management. Airtel’s share dropped by 5% on the day after Adani Group announced its participation in the auction.
While Adani Group continues to deny it, there is a likelihood that the company may venture into consumer mobility after some time. What goes in favor of this argument is that it would have been cheaper for Adani Group to partner with a telco to set up 5G private networks for its businesses spread across the country. Further, it could have waited for the government to provide a spectrum at administrative rates to the enterprises for captive 5G networks. Adani Group’s allegedly close association with the government could have possibly even helped it to expedite the bureaucratic process to grant the 5G spectrum to the enterprises. In this context, its participation in the 5G spectrum auction is somewhat perplexing.