Trai suggests 36% cut in 5G auction prices

NEW DELHI: The telecom regulator on Monday recommended a 35.6% cut in the base price of 5G spectrum band (3300-3600 Mhz band) to ₹317 crore on a pan-india basis from the ₹492 crore it suggested in 2018, offering major relief to telcos and setting the stage for them to secure prized airwaves in a government auction. The Telecom Regulatory Authority of India (Trai) has also suggested a reduction in reserve prices in the 700 Mhz band, where base prices have been cut by as much as 58% and 45% in the key circles of Mumbai and Delhi, at ₹470 crore and ₹509 crore, respectively, for paired spectrum for a duration of 20 years. On a pan-india basis, the base price comes to ₹3,927 crore per Mhz, 40% lower than the prices recommended by the regulator in 2018. The regulator has set the same base price for the 600 Mhz band, a new band, which along with 700 Mhz, could provide contiguous spectrum for the country’s top three carriers, Reliance Jio, Bharti Airtel and Vodafone Idea, if they opt for the bands in the upcoming spectrum auctions.

The government plans to hold the auctions by May-june and will have to approve all of Trai’s recommendations before proceeding with the spectrum sale.

Analysts, however, said that the cuts were inadequate and airwaves may not be fully picked up by service providers in the auctions since the industry’s financial health was still weak and more reforms from the government are needed to nurse it back to health.

“The reduction is not enough, especially in 3300-3600 Mhz. Compared to global benchmarks, spectrum prices in India are very high, but the revenues from the capital deployed in the spectrum bands are far lower than in other countries. For instance, India’s telecoms service revenue is 60% of Germany’s, 70% of the UK’S, and 90% of South Korea,” said Prashant Singhal, global TMT emerging markets leader at EY.

Some in the industry read the reduction in base prices as a positive sign.

“This will enable service providers to spend additional capex and launch new-age services and business models. The lower budgetary obligation for spectrum will allow the telecom operators to strengthen their fibre penetration in backhaul infrastructure, bolster the initiatives around building broadband highways, connecting rural areas, and investing towards Open RAN,” said Ankit Agarwal, managing director at Sterlite Technologies.

The reserve price of spectrum allocation for 30 years will equal 1.5 times the reserve price of spectrum allocation for 20 years for the respective band, the regulator said on Monday.

The regulator has recommended that all available spectrum should be put on sale in the 700 MHZ, 800 MHZ, 900 MHZ, 1800 MHZ, 2100 MHZ, 2300 MHZ, 2500 MHZ bands and new spectrum bands - 600 MHZ, 33003670 MHZ and 24.25-28.5 GHZ.

Trai has also rationalized spectrum caps and removed the overall cap across all bands. It has recommended easy payment options, including payment over 30 years.