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Business News/ Industry / Telecom/  Telcos  want Trai to reduce 5G airwaves base prices by 90%
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Telcos  want Trai to reduce 5G airwaves base prices by 90%

Private enterprise networks should be disallowed to ensure financial viability of industry: COAI

The Cellular Operators Association of India has said the spectrum pricing that the Trai has recommended to the government was too high and disappointing. afpPremium
The Cellular Operators Association of India has said the spectrum pricing that the Trai has recommended to the government was too high and disappointing. afp

The Telecom Regulatory Authority of India (Trai) should cut the base prices for 5G airwaves by at least 90% to bring them in line with global peers and revise its recommendations as they run contrary to the relief provided by the government through the reforms in 2021, the telecom industry said. Sector analysts concurred and highlighted that telcos would have to pay more to buy airwaves at base prices for 30 years.

“The spectrum pricing recommended by Trai is too high. Industry recommended 90% lower price and to see only about 35-40% reduction recommended, therefore, is deeply disappointing," the Cellular Operators Association of India (COAI), which represents all carriers, including Bharti Airtel, Vodafone Idea and Reliance Jio, said a day after Trai released its recommendations on 5G spectrum pricing.

Trai recommended a near 40% reduction in the reserve price for 5G bands, 700 Mhz and 3300-3670 Mhz, and has also introduced a new band, 600 Mhz, for 5G while keeping the base price same as that for 700 Mhz. The regulator reduced the base rate in the 3300-3670 Mhz band to 317 crore on a pan-India basis from the 492 crore it suggested in 2018. Rates for the 700 Mhz band have been reduced by 40% to 3,927 crore per MHz. At current prices, a block of 5MHz spectrum in the 700MHz band will cost $2.6 billion versus $4.4 billion earlier, said analysts at Credit Suisse and a 100MHz block in the 3.4GHz band will cost $4.2 billion versus $6.6 billion earlier.

Trai has also recommended easy payment options, including payment over 30 years, part payment and flexibility of moratorium, besides easier rollout conditions for operators.

Spectrum prices will be 1.5 times if airwaves are taken for 30 years instead of 20 years. Trai has said captive enterprise networks can be set up by taking spectrum from the government directly or on lease from telcos.

“If one were to look at the pan-India price of 3.5 GHz spectrum, we are back to square one with effectively no change, and this will nullify the relief provided by Union cabinet in 2021," the industry body said.

The COAI has said private enterprise networks should be disallowed to ensure the financial viability of the telecom industry and do away with the retrograde steps of 1.5 times price multiple for 30 years of spectrum allocation and minimum rollout obligations.

Sector watchers have noted that the outgo for all carriers will rise if they buy 5G airwaves at the current prices. A pan-India 50MHz of 3,300-3,670MHz, or 5MHz of 700MHz, the spectrum may require an outlay of 23,800 crore or 29,500 crore, according to analysts at Motilal Oswal Financial Services. It could also entail an upfront investment of 6,000 crore or 7,000 crore, assuming a 25% upfront payment, with annual EMI payments of 1,500 crore over 16 years.

“Even at a modest participation in this auction, the debt levels of the industry are likely to elevate to 4.8 trillion by March 2023, despite the improvement in the cash flow generation post the tariff hikes as well as the deleveraging initiatives undertaken by the telcos," said Ankit Jain, assistant vice president and sector head - corporate ratings, at Icra Ltd.

Industry analysts have noted that Airtel and Jio may opt for 100 Mhz pan-India airwaves at the base prices without them getting into a bidding war, as the prices are still high. Vodafone Idea may bid for 5G only selectively, given its poor financial health. “Airtel and Jio are well-positioned to participate in the upcoming 5G auctions, while VIL’s ability to effectively compete in 5G auctions is constrained because of the weak balance sheet," analysts at Credit Suisse said in a note to clients seen by Mint. The 700 Mhz band could see some demand with Airtel having completed its pan-India sub-GHz spectrum footprint and Jio also beefing up its sub-GHz spectrum holdings in the 2021 auction, they said. The brokerage backed Airtel as the key beneficiary of the average revenue per user improvement, improved regulatory environment, and organic market share gain.

“Trai has significantly eased the upfront and annual payouts for the 5G spectrum, but we still believe that in the absence of significant fundraising, Vodafone Idea’s 5G rollout would remain constrained in the near term, which in turn would lead to further market share gains for Bharti and R-Jio as they roll out 5G," said analysts at Nomura Global Markets Research.

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ABOUT THE AUTHOR
Gulveen Aulakh
Gulveen covers both corporate and economy, and policy sections of Mint. She also covers telecom, IT from the corporate side and disinvestment, finance ministry from the economy side. Gulveen finds the rare mix of sectors she covers to be incredibly interesting.
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Published: 13 Apr 2022, 01:06 AM IST
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