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Business News/ Industry / Telecom/  Battle for 5G starts in July, in test for telcos
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Battle for 5G starts in July, in test for telcos

Reliance Jio, Bharti Airtel, Vodafone Idea to vie for prized 5G spectrum

The government has set the base price of 5G airwaves (3300-3600MHz band) 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. (Photo: Mint)Premium
The government has set the base price of 5G airwaves (3300-3600MHz band) 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. (Photo: Mint)

India will auction 5G airwaves beginning 26 July as the government set the ball rolling for the next round of spectrum sale following an approval from the Union Cabinet on Wednesday. Final bids from interested parties have been called by 8 July.

The government has set the base price of 5G airwaves (3300-3600MHz band) 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.

“The roads are now clear for the 5G auctions. 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.

The government has also announced auction of mm Wave band which will not only help in unlocking the true potential of 5G, but will also help strategically manage costs for the operators, he added.

Leading carriers Reliance Jio, Bharti Airtel and Vodafone Idea are key contenders of the airwaves that are critical for introducing the next generation of technology after 4G. Carriers are expected to shell out 1 trillion to 1.1 trillion in the upcoming auctions, according to ratings agency ICRA.

According to the notice inviting applications, the formal document that lays down the auction guidelines and procedures, bidders can apply by 8 July for 72097.85 MHz of spectrum that will be put 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 of 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 after one year in the band acquired through the auction.

Some key payment relaxations have been made in the payment terms for the 2022 auctions. Spectrum bought in the auction will be allotted for 20 years and payments for spectrum can be made in 20 equal annual instalments. The mandatory requirement to make upfront payment by the successful bidders and submitting a financial bank guarantee equivalent to one annual instalment, have been done away with. Telcos will have an option to pay up front as well. 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 on the liquidity position and is also likely to boost participation. The upfront payment is likely to be close to 10,000 crore; adding this to the existing payments, the industry needs to shelve 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 trillion as on March 31, 2023, before moderating to 5.3 trillion by March 31, 2025, even as telcos have been focusing on deleveraging, with Bharti Airtel recently concluding its rights issue of Rs. 21,000 crore and collected 25% as upfront payment, while Vodafone Idea 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. SUC paid by operators currently varies between 3-5% of Adjusted Gross Revenue (AGR) depending on the year of acquisition and the 0% SUC will be a welcome relief to operators and enable a faster 5G rollout," said Prashant Singhal, global telecom media and technology emerging markets leader at EY.

Private 5G networks

The Cabinet also decided to enable the development and setting up of private captive networks. The government said this will spur a new wave of innovations in Industry 4.0 applications such as machine to machine communications, Internet of Things (IoT), Artificial Intelligence (AI) across automotive, healthcare, agriculture, energy, and other sectors.

The government has specified that enterprises setting up captive non-public network may obtain the spectrum on lease from telcos and establish their own isolated network. The department of telecommunications will issue the required licensing terms and conditions, and spectrum leasing guidelines.

“Enterprises setting up CNPNs may obtain the spectrum directly from DoT and establish their own isolated network. In this regard, DoT will undertake demand studies and thereafter seek TRAI recommendations for direct assignment of spectrum to such Enterprises," the government specified.

The move comes as a big blow to telecom service providers that have said that this will distort the level playing field and rob the government of revenues, but will benefit big tech companies like Google and enterprises like TCS have been seeking direct allocation of spectrum for applications such as machine-to-machine communications, IoT and AI.

“To boost technological advancement the government has also announced development of private networks which will pave the way for industry 4.0 applications. Together these steps will open up newer avenues for deeper penetration and access, rich user experience via consolidation as well," said Deloitte India’s Vaish.

The government said in the statement that it will be the responsibility of the telco to ensure that the prescribed QoS or quality of service to their customers through public network is maintained, including interference-free co-existence of the public and private networks.

Broadband India Forum, which represents technology companies backing private 5G networks, welcomed the government’s decision, stating that this will lead to better efficiencies, productivity and output for the enterprises, accelerate digitisation, boost capabilities, propel indigenous manufacturing and eventually garner greater economic gains for the country.

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Gulveen Aulakh
Gulveen Aulakh is Senior Assistant Editor at Mint, serving dual roles covering the disinvestment landscape out of New Delhi, and the telecom & IT sectors as part of the corporate bureau. She had been tracking several government ministries for the last ten years in her previous stint at The Economic Times. An IIM Calcutta alumnus, Gulveen is fluent in French, a keen learner of new languages and avid foodie.
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Published: 16 Jun 2022, 12:21 AM IST
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