Telecom Regulatory Authority of India (TRAI) on Monday, 11 April, recommended a 40 percent cut in the reserve price of 700MHz band and a 36 percent cut in the reserve price of 3300-3670 MHz band, popularly known as mid-band 5G.
Reserve price refers to the lowest amount that a seller will accept as the winning bid – a base price of sorts.
Pan-India, the recommended reserve price of mid-band 5G spectrum is now Rs 317 crore per unit while the reserve price of 700MHz – and the newly introduced 600MHz band – is Rs 3927 crore per unit for 20 years.
TRAI hopes that the reduced prices will attract aggressive bidding from telecom giants Jio, Airtel and Vodafone Idea at the spectrum auctions, reportedly planned for May-June this year.
The central government will have to approve the recommendations before the auction.
The upcoming auction is set to be the largest ever in India with over 104,000 MHz of airwaves valued at around Rs 2 lakh crore on sale. The total value could even exceed 3 lakh crore, a telecom analyst told The Economic Times.
Apart from lowered prices, TRAI recommended some other measures to provide relief to Indian telcos.
"For the long-term growth and sustainability of the telecom sector, infusing
liquidity and encouraging investment, the Telecom Service Providers
should be allowed easy payment options including part payment with
flexibility of moratorium," TRAI said in its statement.
It has recommended two payment options – full or part upfront payment within 10 days of completion of auction.
To aid ease of doing business, it recommended "easy and transparent spectrum surrender guidelines with a spectrum surrender fee of Rs 1 lakh per spectrum band per license area."
A Struggling Industry
When Jio entered the space in 2016 with low tariffs and cheap internet plans, it shook Indian telecom. Reliance's deep pockets let Jio lower its prices to unsustainable levels and other telecom providers, including Vi, were forced to do the same in fears of losing their subscribers to Jio.
Vi has been struggling with enormous debt of around 2 lakh crore, most of which it owes the Indian Government. It is also plagued by growing losses.
In 2019 the Supreme Court told both Vodafone and Airtel to pay the government close to Rs 20,000 crores each in Adjusted Gross Revenue (AGR) dues, adding to the debt burden.
It doesn't help that India has some of the lowest telecom rates in the world, even with the recent price hikes.
Telcos have expressed concern about the 5G prices proposed in 2018 and have avoided the 700 MHz bandwidth for two successive sales, due to high prices. They even pushed for a 90-95 percent cut in base price of 5G spectrum.
“The reduction is not enough, especially in 3300-3670 MHz. Compared to global benchmarks, spectrum prices in India are very high, but the revenues from the capital deployed in the spectrum bands are far lower than in other countries," Prashant Singhal, global TMT emerging markets leader at EY told Mint.
"India’s telecoms’ service revenue is 60 percent of Germany’s, 70 percent of the UK’s, and 90 percent of South Korea’s," he added.
Financial services company Nomura suggested in a report that in the absence of significant fundraising, Vi’s 5G rollout would remain constrained in the near term, which would lead to further market share gains for Airtel and Jio.
Trai said that only 37 percent of the spectrum put up for sale in the previous auction, in March 2021, was acquired by telecom companies and that spectrum lying idle is a waste for the economy.
(With inputs from Mint, The Economic Times and BloombergQuint)
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