Indian Telcos Might Skip 5G Spectrum Auction if the Prices Are Too High: Fitch

By September 28th, 2018 AT 4:33 PM

The National Digital Communications Policy (NDCP) 2018 which was approved by Union Cabinet a couple of days ago is said to help companies serve the growing data needs for consumers, cut the costs and at the same time, reduce red tape. Private telecom companies’ growth will be supported as the NDCP focuses to expand broadband coverage funded by the universal service obligation fund and in partnership with private telcos, global ratings major Fitch said in the report. The NDCP 2018 is aiming to attract USB 100 billion investment and create 40 lakh jobs in the sector by 2022. In the report, the rating firm also added that telcos might skip 5G spectrum auction if the prices are too high.

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It explained that this would be possible through the broadening of the customer base and improvement of Internet adoption, particularly in rural areas. NDCP’s plan to encourage more efficient spectrum usage will also help private telcos by making available harmonised and contiguous spectrum bands and further liberalising spectrum sharing and trading, it said.

The agency said implementing proposals like connecting six lakh villages to the broadband network, establishing two million Wi-Fi hotspots in rural areas and one million in urban areas, will be a challenge. Accelerated 5G deployment will encourage companies to increase investment in the 5G spectrum which, depending on the 5G spectrum asset price, may further stretch already heavily indebted balance sheets over the next two years, it warned.

However, the agency was quick to add that private telcos may also skip 5G spectrum auctions if the prices are “too high”. On the positive side, the report said NDCP’s plans to review and rationalise the sector’s tax structure and optimise future spectrum asset pricing can cut telcos’ costs and the red tape.

The agency said at present the telcos face a lot of pressure on taxes through licence fees, spectrum usage charges and universal service fees on top of expensive spectrum assets, while the litigation is also high.

In what can come as a relief for the sector, which has been impacted since the launch of the deep-pocketed and aggressive new entrant Reliance Jio, the agency said the emergence of three large operators would eventually ease price competition.

Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.

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