According to the chart, out of the Rs 20,000 or so that Vodafone spent, about 9,221 cr has been on 2.5 GHz band, about 7,315 cr on 2.1 GHz (3G) band and 3,744 cr on 1800 MHz band.
The surprising thing is the heavy investment into the 3G or 2.1 GHz band.
None of the operators were expected to spend much money on 3G spectrum, except perhaps for Idea, which is yet to have a pan-India 3G footprint.
However, even Idea Cellular did not say much about 3G in its post-auction statement to the public.
VODAFONE’S OFFICIAL STATEMENT
“Vodafone India has acquired spectrum in all its key telecom circles in the spectrum auction for a total cost of INR 202.8 billion (€2.74 billion). The new spectrum significantly enhances the coverage, capacity and speed of Vodafone India’s 4G data services in its key circles, complementing existing high-quality 2G and 3G voice and data capabilities.
It acquired a total of 2 x 82.6 MHz FDD and 200 MHz TDD spectrum in the auction, providing high-capacity, multi-band 4G capability operating across the 1800, 2100 and 2500 MHz bands.
It now has 17 circles with 4G capability, covering 91% of the company’s total revenues and 94% of mobile data revenues.”
WHY VODAFONE BOUGHT 3G SPECTRUM IN 2016
The official statement suggests that analyst estimates about the company’s spectrum purchases are correct, as the numbers tally.
This brings us to the question of why the company would go for purchasing 3G airwaves when everyone’s talking about the next level of technology.
The explanation is as follows.
Vodafone’s first choice was to buy the same band that is being used by Jio and Bharti Airtel and launch 4G on it.
This would help the company compete on an even footing with the other two, and would also give it good data carrying capacity as 20 MHz could deliver decent amounts of bandwidth to customers compared to 5 MHz on the 1800 band.
However, faced with stiff competition from Airtel and Jio — who were trying to add to their 2.3 GHz deployment, Vodafone seems to have changed it tactics in the auction.
It was faced with three choices.
One — it could try to outbid Jio and Airtel and get one 20 MHz block of 2.3 GHz spectrum in the auction at a big cost.
Or — it could but 3G spectrum — of which there was plenty — and use it for deploying 4G.
Or — it could simply move away from the bidding war and buy 20 MHz of 2.5 GHz spectrum at a lower cost.
Both the second and third choices had their own shortcomings.
In case of the second option involving 3G spectrum, the bandwidth would have been an issue since the quantum of the spectrum used for download is just 5 MHz, compared to about 15 MHz in option 1.
This would severely restrict the carrying capacity of the company’s 4G network in India.
This problem, however, would not be there if it chose option 3, which is to buy 20 MHz in 2.5 GH band. This would give it a downlink spectrum size of around 15 MHz — enough to compete with Jio and Bharti.
However, this option also had a severe shortcoming — there are practically no devices that support this band being sold in India.
The British company seems to have come up with an innovative solution for its problem involving taking the best of option 2 and 3.
It bought 5 MHz of 3G spectrum plus 10 MHz of 2.5 GHz spectrum.
This solution gives it the best of both worlds. The 3G band (2.1 GHz) is the most widely supported 4G band among devices.
In other words, if the company was to launch its 4G services on 3G spectrum, virtually all the smartphones in India would be able to use the network. In fact, the 3G-for-4G spectrum is actually called ‘Band 1’ for LTE.
This solution also has the added advantage that after a couple of years, Vodafone could shut down its 3G networks and add that spectrum into its 4G network.
Now comes the second issue — that of bandwidth. Since 5 MHz won’t be enough, especially for dongles, Vodafone can implement a second solution called carrier aggregation.
This merges spectrum from different bands into one ‘beam’ and delivers consistent and high data speeds. Bharti Airtel has already launched this technology in some circles.
Given this strategy, the company has bought 10-20 MHz in the capacity-oriented 2.5 GHz band in 15 out of the 22 circles in India.
The only four big circles where it has not are Karnataka, Andhra Pradesh, Tamil Nadu and Madhya Pradesh. It is not clear why it did not buy the so-called capacity spectrum in these circles, but competition with Idea is a likely factor.
Along with these purchases, the company also bought either 5 MHz of 3G spectrum or an equal quantity of spectrum in band 3 (1800 MHz), which is also equally well supported by handsets.
In some circles like Kerala, where it already has band 3 airwaves, it has simply bought 2.5 GHz airwaves to be added on.
So, going by analyst estimates, the UK-based company’s spectrum purchases are as given in the table below.