India sets terms for 5G spectrum auction
NEW DELHI: The Union government cleared on Wednesday the auction for fifth generation (5G) telecommunications spectrum, paving the way for the process to begin before consumers soon get access to ultra-fast connectivity on their mobile phones.
Companies such as Bharti Airtel Ltd, Vodafone Idea Ltd and Reliance Jio Infocomm Ltd are set to spend thousands of crores next month when the process begins. A person aware of the matter said the government expects to rake in ₹4.5-5 lakh crore, based on the reserve price.
In a controversial part of the decision, the government also reserved a portion of the 5G spectrum for private in-house networks, a proposal strongly opposed by the telcos. Allowing companies to bid to roll-out private captive networks will enable private entities to offer their own networks within limited areas like compounds and campuses. “Since private captive networks have been allowed for major corporate players, many telecos may not find the spectrum auction lucrative enough and that could hit the actual mop-up,” said the person quoted above, asking not to be named.
The government set the base price for the 3300-3600MHz band, a stretch of airwaves that is best suited for high-speed 5G networks, at ₹317 crore on a panIndia basis, a 36% reduction from the ₹492 crore it had kept in 2018 when the spectrum remained unsold. A senior official at a telco said the Cabinet decisions was a setback as the industry was expecting a further reduction in spectrum prices and the extension of the licence period from 20 to 30 years. Bharti Airtel, Reliance Jio and Vodafone Idea have been seeking a 90-95% cut in base prices to make 5G services more affordable. Telecom operators are expected to spend as much as ₹1.1 trillion in the upcoming auctions, ratings agency ICRA Ltd estimated.
While the auction is expected
to cost the bidders billions of dollars, the pay-off is uncertain, at least in the near term. Bharti Airtel and Vodafone Idea are still emerging from a tariff war with Reliance Jio, a rivalry that has shredded the finances of many telcos. The latest auction is likely to strain the precarious finances of Vodafone Idea further. Against this backdrop, analysts do not expect the telcos to go into an aggressive bidding war for the spectrum. The auction will start on July 26, the government said on Wednesday, after the cabinet cleared the proposal.
“This is probably one of the most awaited spectrum auctions, which will bring significant advancements for the industry and consumers,” said Peeyush Vaish, partner and telecom sector leader, Deloitte India.