Brokerage firms expect cut in 5G spectrum prices
NEW DELHI: Brokerages expect a sharp cut in reserve prices of 5G spectrum – from the exorbitant $7 billion for pan-India airwaves in 3.3-3.6GHz band – ahead of the spectrum auctions slated for the coming quarters of 2022.
“While the reserve price for pan-India 5G (2.6 GHz) is not known, we estimate it could be in the range of $5-6 bn,” said analysts at BofA Securities in a note to clients on Thursday, that was seen by Mint.
The firm added that Bharti Airtel and Reliance Jio will largely bid for pan-India 5G spectrum and Vodafone Idea may bid selectively, expecting further tariff hikes in the sector.
“5G spectrum cost would likely be cut from US$7bn for 100MHz in 3.3-3.6GHz bands besides extension of licence tenure to 30 years from current spectrums for 20 years,” said analysts at brokerage house CLSA in a separate note.
Analysts said that while 4G spectrum purchases of US$11bn in 2021 were due to renewal compulsions of operators 800MHz for RJio - but success of the 5G auctions will hinge on price cuts on a pan-India basis.
They added that since India is a mobile first country, lower 5G prices will boost internal rate of return and spectrum purchases will multiply opportunities, alongside ongoing sector improvements and strong growth.
Telecom service providers have consistently sought rationalisation in prices for 5G airwaves which they think are prohibitive and exorbitant, even as the Telecom Regulatory Authority of India (Trai) has begun a consultation process on fixing the reserve price for airwaves in the 5G bands.
The government aims to hold auctions by March this year, but there is likely to be a delay since the consultation process would take time to be completed.
In 2021, 63% of spectrum in auction was unsold and historically, the government has cut prices by 30-40% if there was no demand in previous auction, analysts at CLSA noted.
Communications and information technology minister Ashwini Vaishnaw told Mint last month that the government was sanguine of the issues of the industry, primarily the high spectrum prices, and may consider providing relief since telecom services including 5G technology would be a source of ‘public good’ rather than a revenue maximisation tool for the government.
“It (telecom) is not just a revenue maximization thing (tool), but there is certainly an element of public good in the telecom sector. In fact, some countries have taken very extreme steps of even de-licensing and making it zero-cost. During Covid-19 pandemic, everybody, including the Trai and the industry, realises that it’s telecom which is supporting everything,” he had said.