Cut the reserve price
Govt must look beyond revenues in spectrum auctions
The new year has set the mood for telecom auctions in the country with the government announcing the 4G spectrum bidding timeline. This is only the beginning as the real play is expected later in the year when 5G auctions are announced. 5G telecom services will mean a whole new universe of cutting-edge technology for enterprises and businesses across sectors from health care to education to consumer goods, riding on artificial intelligence and internet of things (IOT). For that to happen, private telecom service providers Reliance Jio, Bharti Airtel, and Vodafone Idea will need to invest substantially in 5G services, starting with their bids for the auction expected around September. But to ensure active industry participation in 5G auctions and to prevent further deterioration in the health of the telecom sector, the reserve price for bidding must come down. Apart from telcos, even a task force constituted by the finance ministry has suggested rationalising prices so that the next generation services become affordable for all.
The Department of Telecom had accepted the 5G reserve price — at ~492 crore/mhz — recommended by the Telecom Regulatory Authority of India (Trai) in 2018. This is in contrast to the much lower average price of 5G band auctioned in some other countries such as South Korea, Spain, Italy, and the UK at ~85-90 crore/mhz. Trai had recommended auctioning about 8,644 MHZ of telecom frequencies, including those of 5G services, at an estimated base price of ~4.9 trillion. The financially stressed telcos have been opposing it, calling the proposed prices exorbitant. While the regulator has refused to review the reserve price, saying that the health of the industry has no relation to the 5G price, R S Sharma, as then Trai chief, had himself pointed out that the government had the authority to change the price if it found merit in doing so.
The government, therefore, should bring down the reserve price in consultation with the industry without losing time. The process of consultation should start immediately, so that the government can arrive at a price that’s feasible for the industry in the current context. That will help telcos in India formulate their business plans at a time when all global operations are focused on it. The government should resist any attempt at revenue maximisation through 5G telecom auction, and rather aim to strengthen the sector at a time when it needs it the most.
Ahead of the 4G auction starting on March 1, the telecom industry has sought clarification on the way forward, and the government must not hesitate in giving it. It’s important to remember that in the past, telcos have bled after spending heavily on 3G auctions. Subsequently, the industry response has been extremely muted on certain premium 4G bands such as 700 MHZ because of the high price. Neither of the two scenarios — excess spending and no show by the industry — will yield dividends in either the short- or long-term future. So, the government, which has the final say on reserve prices, must step in to enable the Indian telecom industry to be a leader in 5G. The hard-pressed industry is still in the middle of a large payout towards adjusted gross revenue dues, making revival a distant dream for it. A lower reserve price for the next round of auctions can be a game changer.