Expectations about spectrum prices in many markets might be too high. In India for example, Bharti Airtel might not bid at all on new 700 MHz spectrum.

On the other hand, the high prices, which will deter bidding, might also create an opportunity for new entrants, possible including AT&T and Virgin Mobile.

In the U.S. market, Sprint and Liberty Global will not bid on 600 MHz spectrum. In most cases, non-bidders will point to existing spectrum resources as reasons for bidding on new spectrum.

The unstated rationale is that capital might not be readily available to do so, debt loads are an issue, or prices are seen as too high.

“We do not expect Bharti to bid in the upcoming auction of 700MHz in India, given the high indicative price for this spectrum, limited device availability and the company’s ownership of alternative spectrum (1800MHz/2300MHz) to roll out 4G services,” said Fitch Ratings.

Airtel already has the ability to offer 3G and 4G services on a pan-India basis, unlike most of its peers, and although more spectrum always is welcomed, the cost is an issue.

Operating EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) margin will decline to 34 percent in the 2017 fiscal year and 31 percent in the 2018 fiscal year due to an increase in competition as Reliance Jio likely offers cheaper data tariffs, forcing others to lower their prices as well.

Bharti Airtel earlier in 2016 had acquired 1800 MHz spectrum in six Indian service areas, or “circles”, from smaller telco Videocon.

The acquisition will give Bharti the ability to offer 4G services in 19 of 22 circles compared with Reliance Jio, which has access to 4G spectrum in all 22 circles.

Vodafone and Idea have 4G spectrum in five and 12 circles, respectively.

Bharti’s deal comes amid rapid growth in data services, as usage is doubling annually while data average revenue per user (ARPU) per month has jumped to over INR200 – higher than Voice’s INR137.

The top four Indian telcos have been keen to acquire spectrum from smaller unprofitable firms since September 2015, when the regulator allowed spectrum trading among telcos.

Fitch maintains a negative outlook on the Indian mobile  industry for 2016 as we expect the credit profiles of the top-four telcos to come under pressure from tougher competition, larger capex requirements and debt-funded mergers and acquisitions.  The entry of Jio will intensify the competition.

The industry blended tariffs should fall by five percent to six percent, as a result.

The Indian telco industry will continue to consolidate, and we expect five to six operators to emerge from the shake-out. The top four–Bharti, Vodafone India, Idea Cellular and Reliance Communications–are likely to raise their revenue market share to 80 percent, up from 77 percent in 2015.