5G spectrum auction: The 5G spectrum auctions witnessed good all-round participation over the last seven days, despite just four participants, thanks to a significant quantum of spectrum available across bands, with sufficient caps to limit any price rise and aggressive participation by players.

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In a three-player industry, Reliance Jio and Bharti Airtel spent Rs 88,078 crore and Rs 43,048 crore, respectively, in line with their EMD (Earnest Money Deposit) submissions, while Vodafone Idea Ltd bought spectrum for Rs 18,799 crore.

The completion of the 5G spectrum auction clears a key overhang on telecommunication companies, particularly Airtel, as any aggressive investment, with limited near-term monetization possibilities, can add to its balance sheet woes, domestic brokerage firm Motilal Oswal said.  

Unlike a 3G or 4G technology upgrade, which pushed consumer mobility towards data usage, 5G may not materially move the needle in the near term, the brokerage said, while citing the factors like: the wireless data subscribers have already reached over 70 per cent of total subscribers, 5G may not offer materially higher ARPU, and players will need some time to ramp up their network.  

Motilal Oswal expects Bharti Airtel to garner 18% EBITDA CAGR over FY22-24, without building any earnings from forthcoming tariff hikes – a high probability in the next couple of quarters. With valuations compelling at 7x FY24E EV/EBITDA, it remains positive on the stock.

While for Jio, it expects a revenue/EBITDA growth of 16%/20% over FY22-24E. RJio’s value in RIL share works out to Rs 960, assuming a premium of over 50% premium to Airtel, given its market leadership and higher market share gains, tariff hike opportunity, and growth avenues in digital.

VI has bid aggressively in the auction, which may not put pressure on liquidity or pose a challenge to its network expansion unless it is able to get a large-scale capital infusion, the brokerage said.

Telecom heavyweights such as RJio’s Reliance Industries shares closed flat with a positive bias, and Bharti Airtel shares dipped by over 1 per cent to Rs 686.6 apiece, owing to the weak market sentiments, however, Vodafone Idea shares ended up over 3 per cent to Rs 9.48 per share on the BSE.