Proposed 5G Spectrum Auction Will Not Generate Enough Income for the Government

The 5G spectrum sale will not generate enough income for the government to meet its budget FY20-21 estimates as telecom sector reels under financial crisis

By February 10th, 2020 AT 3:09 PM
Highlights
  • Bharti Airtel, Vodafone Idea to miss out 5G spectrum sale happening on April 1
  • Unrealistic pricing and adverse AGR decision blamed for lack of interest in 5G
  • Reliance Jio only to buy some 5G spectrum and instead stick with 4G

The 5G spectrum sale will only generate Rs 10,000 crore as upfront payment according to Telecom Department officials, a figure far lower from government’s expectations as some of the major telcos are facing a financial crisis due to adverse AGR decision. This means next spectrum sale could bring only around Rs 35,000-40,000 crore overall against the Rs 5.86 lakh crore worth of airwaves that the government intends to put on sale at base price, says an ET Telecom report. Telecom operators make around 25% upfront payment for the sub-1 GHz band and 50% for higher bands they win in auctions. The remaining balance is paid over 16 years in equal instalments.

proposed-5g-spectrum-generate-income

Airtel and Vodafone Idea Likely to Miss Out Spectrum Auction

Bharti Airtel and Vodafone Idea, are likely to miss out the 5G spectrum auction, as per the officials. Two of the major operators face a combined Rs 89,000 crore in AGR dues following the adverse decision in Supreme Court. Last week, Airtel CEO Gopal Vittal had said the 5G prices were way beyond their reach.

“On the 3.5 Ghz band, Trai has recommended price to Rs 50,000 crore for 100 MHz of spectrum. 5G requires a large block of spectrum. 100 Mhz spectrum for 50,000 crore, we can’t afford. We believe it is too high. We will not pick it up at those prices,” Airtel MD and CEO for India and South Asia Gopal Vittal said last week.

Vodafone Idea, which is in the midst of a costly merger, is largely going to give the auctions as miss as per officials. The company too had on occasion, lamented about higher 5G prices. Reliance Jio Infocomm is the only telecom company which will be bidding for 5G airwaves but not much as per telecom officials. “Of the three players, Jio may take some 5G spectrum but not much, besides some 4G. We expect it will do so to get the first-mover advantage,” revealed a telecom official.

5G Pricing Criticised by COAI as Well

The 5G pricing was also criticised by the Cellular Operators Association of India, the body representing all the private players in the industry. Director Rajan Mathews said while the government plans for 5G auction were commendable, the unrealistic pricing of key spectrum bands will only get in the way of 5G expansion.

He estimated that the government would be able to garner around Rs 6,000-7,000 crore as upfront payment from the auction. This means the government will fall way short of its estimated budget of Rs 1.33 lakh crore for the upcoming fiscal.

Chakri is a go-to guy for your next smartphone recommendation. Back in his engineering days, he used to play with smartphones by installing custom ROMs and that passion got him into the tech industry. He still goes nuts about a smartphone knocking his door for review. Currently managing everything at Telecom Talk, Chakri is trying to master PUBG Mobile in his free time.

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