The government’s 5G talk is ill-timed
In a case of bad comic timing, the Telecom Regulatory Authority of India (Trai) has issued a consultation paper on the auction of a myriad set of spectrum bands, including 5G spectrum. Ironically, this comes at a time when companies are seeking relief from the government, citing declining revenue and mounting debt. And according to reports, the government is considering extending the time for deferred spectrum payments to 16 years, from the current 10-year term telcos had agreed on while buying spectrum.
In other words, even though it’s clear to the government that telcos haven’t been able to digest past purchases of spectrum and the costly rollout of 3G and 4G networks, it is bent on realizing more revenue from spectrum auctions. Trai’s paper is in response to a department of telecommunications letter informing it about the government plans to auction spectrum this year.
Besides, since the top telcos have bought large amounts of spectrum in the previous two auctions, as well as from small and struggling operators, the value of spectrum has fallen considerably. “The deal between Bharti Airtel and Telenor shows the rapid fall in value of spectrum as an asset in the hands of Indian telcos. The total consideration in the deal worked out to only ~40% of Telenor’s carrying value of spectrum assets (note that all this spectrum was purchased in auctions, and in 1800MHz which is by far the most evolved LTE ecosystem currently),” analysts at Credit Suisse pointed out in a note to clients earlier this year. LTE stands for long-term evolution, a 4G mobile communications standard.
It’s clearly premature to talk about spectrum auctions at this stage, with demand expected to be extremely low. As such, the joke is on the centre. It will either experience another failed auction, like it did last year with the 700MHz band, or it will have to settle for extremely low prices, and hence lower-than-anticipated revenue from auctions.
Already, its revenue from licence fees and spectrum usage charges has dropped, thanks to falling tariffs after Reliance Jio Infocomm Ltd’s entry. From the looks of it, it will have to settle for lower capital receipts as well.
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