New Delhi, March 3 : Jio's spectrum purchase of Rs 571 billion ($8bn) was substantially higher than forecast (less than $3bn) and clearly there is some upside risk to the total capex forecast of $9bn over FY21-23, JP Morgan said. "We also find the Chairman's comments about the spectrum purchase allowing it to enhance the experience for the 'next 300mn subscribers' as intriguing and some might read it as indicating that Jio remains focused on subscriber additions over tariff increases. We maintain our view that tariff increases over FY21-23 are likely going to be substantial, driving large earnings increases for RIL," it added. RIL announced that its subsidiary RJIO (Jio) has acquired the right to use spectrum in all 22 circles across India in the recent spectrum auctions for a total cost of Rs571bn ($8bn); this is substantially higher than our forecast of $3bn. Spectrum has been acquired across 800 MHZ, 1800 MHZ and 2300 MHZ, and with this total spectrum has increased by 55 per cent to 1717 MHZ. Per RIL, the average life of spectrum now stands at 15.5 years and the acquired spectrum can be utilized for transition to 5G services. In terms of payment, upfront payment is Rs 199bn and deferred payment is Rs 378bn (spread over 18 years with interest computed at 7.3 per cent per year). "In our view there is likely going to be some associated capex though not very large. Overall we were forecasting a total capex of $9bn over FY21-23 (including spectrum purchases)", JP Morgan said. UBS said in a note that spectrum auctions ended largely at reserve prices but both Bharti and Jio strengthened their overall spectrum footprint. It added that Airtel's spectrum purchases broadly in line with estimates. Bharti acquired a total of 355MHz spectrum across various bands at a total cost of Rs 187bn (slightly below our estimate of Rs 220bn). These spectrum purchases included both renewal of expiring spectrum as well as additional spectrum in: 1)low band (800/900MHz) - with the company now having nationwide sub GHz spectrum; and 2)high-band (2300MHz) to support network capacity (30-40MHz of 2300MHz spectrum in all circles, versus 20-30MHz earlier). "While we had expected likely outgo for Reliance Jio at Rs 350-360bn, the company spent Rs 571bn, with both renewal of expiring spectrum, as well as additional purchases of spectrum across various bands," it added. The company acquired 488.35MHz of spectrum in total vs our estimate of around 260MHz (refer link) and now has 10-15MHz per circle in low and mid band (vs 5-10MHz before) and 40MHz per circle in high band (vs 30MHz before). "As we expected, Vodafone Idea showed limited interest in this auction, and only purchased 11.8Mhz of spectrum worth Rs 20bn to enhance coverage in 5 circles," it added. Morgan Stanley said in a note that overall bids have turned out to be higher than our expectations. The three private telcos have cumulatively spent US$10.5bn, which is much higher than what we were expecting at US$2.5bn for Jio and US$2bn for Airtel. As the competition in the bidding was low, the supply of spectrum turned out to be higher than the demand, and hence telcos were able to pick up spectrum at reserve prices, Morgan Stanley said. Jio has spent the most in the auctions, envisaging seamless connectivity in future. "Jio's bid at US$7.7bn vs our estimate of US$2.5bn is much higher in view of increasing data demand and possibly due to the upcoming device strategy, where it plans to target 300-350mn feature phone users in India," it added. "We believe data usage on a smartphone could be 1.5-2x the data usage on a Jio Phone and hence data requirements are likely to increase from that perspective. Moreover, the capacity utilization of sub 30 per cent (our estimate) on Jio's network is more of an arithmetic number and may not practically hold true in terms of congestion in particular sites or at a particular time of day, which entails requirements to increase data capacity. The additional spectrum could also be used for selective 5G rollouts until spectrum bands of 3.3-3.6GHz are made available by the government," Morgan Stanley said. /IANS