India sets terms for 5G spectrum auction | Latest News India - Hindustan Times

India sets terms for 5G spectrum auction

ByGulveen Aulakh and Rajeev Jayaswal, New Delhi
Jun 15, 2022 11:28 PM IST

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.

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.

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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 pan-India 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 had 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 (lakh crore) ($14 billion) 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 5G auction will start on July 26, the government said on Wednesday, after the Union Cabinet cleared the proposal.

“This is probably one of the most awaited spectrum auctions, which will bring significant advancements for the industry and the consumers,” said Peeyush Vaish, partner and telecom sector leader, Deloitte India.

According to the notice inviting applications, the formal document that lays down the auction guidelines and procedures, bidders can apply by July 8 for 72,097.85 MHz of spectrum that will be on sale, including 5G airwaves in the 3300-3600 MHz band.

The auction will be held for spectrum in various low (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz), mid (3300 MHz) and high (26 GHz) frequency bands.

“It is expected that the mid and high band spectrum will be utilised by telecom service providers to roll out 5G technology-based services capable of providing speed and capacities which would be about 10 times higher than what is possible through the current 4G services,” the government said in a statement on Wednesday.

Telcos will be allowed to share spectrum in a particular band only a year after the band is acquired through the auction.

Some key relaxations have been made in the payment terms. Spectrum bought in the auction will be allotted for 20 years, and payments can be made in 20 equal annual instalments. The requirements to make upfront payments by successful bidders and submitting financial bank guarantees equivalent to a yearly instalment have been done away with.

Telcos will have an option to pay upfront as well and the bidders would be given an option to surrender the spectrum after 10 years with no future liabilities with respect to balance instalments.

“This avoids any dent in the liquidity position and is also likely to boost participation. The first-year payment is likely to be close to 10,000 crore. Adding this to the existing payments, the industry needs to shell out only 17,000 crore annually towards spectrum instalments till the moratorium ends,” said Ankit Jain, vice president and sector head, corporate ratings at ICRA.

Jain also pointed to an increase in debt levels to around 5.7 lakh crore as of March 31, 2023, before moderating to 5.3 lakh crore by March 31, 2025.

This, even as telcos have been focusing on deleveraging with Bharti Airtel recently concluding its rights issue of 21,000 crore, while Vodafone Idea is close to raising additional funds of 20,000 crore in debt and equity.

The government has further said that no spectrum usage charge will be levied on spectrum bought in the present auctions. The relaxations are expected to significantly ease cash flow requirements and lower the cost of doing business in the sector, the government said.

“This is a positive move. Spectrum usage charge (SUC) paid by operators currently varies between 3-5% of Adjusted Gross Revenue depending on the year of acquisition, and the 0% SUC will be a welcome relief to operators and enable a faster 5G roll-out,” said Prashant Singhal, global telecom media and technology emerging markets leader at consulting firm EY.

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