Telecom stocks — Vodafone Idea, Bharti Airtel, and Reliance Industries Ltd (RIL) — were trading higher on Tuesday after the Telecom Department released a list of pre-qualified bidders for the 5th generation (5G) spectrum.

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RIL’s Reliance Jio Infocomm submitted an earnest money deposit (EMD) of Rs 14,000 crore — the highest amongst the four players in the fray for the spectrum bidding.

EMD is an assurance of payment in good faith made by the telecom operators to the government. The amount is reflective of the quantity of airwaves a company can bid for in the auction.

The EMD amount of Adani Data Networks stood at Rs 100 crore, the lowest. The EMD amount for Bharti Airtel and Vodafone Idea stood at Rs 5,500 crore and Rs 2,200 crore, respectively.

CLSA said that the low EMD for the 5G auction by the Adani Group came as a surprise. The brokerage firm said the bidder’s spend would be around Rs 900 crore and so, Adani Group’s participation poses no risk to other telcos.

With Adani Group submitting modest EMD, Nomura said concerns on increase in competitive intensity ease.

The EMDs of all the four telco applicants seeking 5G radiowaves add up to Rs 21,800 crore, substantially higher than Rs 13,475 crore deposited in the 2021 auction when three players were in the race.

CLSA believes that Reliance Jio Infocomm and Bharti Airtel will likely lead in the 5G spectrum auction.

Bharti Airtel and Reliance Jio Infocomm’s market share gains may accelerate with the upcoming 5G rollouts, Nomura said. Bharti remains the brokerage firm’s preferred pick among listed Indian telcos.

Mahesh Patil, CIO, Aditya Birla Sun Life AMC said, “The competitive intensity is well established. We do not see any material change to that going forward. 5G auction was a key in terms of what the amount of bidding is and what could be the capital outflow. It doesn't look like it's going to be meaningfully higher than the reserve price, which has been set in. However, there was a scare in terms of fourth player coming, but that seems to have been put to rest".

"And while price increases is something which market is factoring in for this year, but that looks to be a bit delayed in the current high inflationary environment. I think it's typical to really do that. The sector looks fairly steady. You should see sequential growth and with the recent correction in some of the telecom, we think the risk reward looks fairly good,” Patil added.

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First Published:Jul 19, 2022 12:51 PM IST