- Vodafone Idea might refrain from spending much in this auction
- DCC has approved the pricing recommended by Trai for spectrum auction
- Some of the premium airwaves like 700 Mhz will be auctioned
The biggest upcoming event in the telecom industry is going to be the auction of the 5G and 4G airwaves which is bound to happen in the next calendar year or to be precise, sometime in the last quarter of the current FY. As per a new ET Telecom report, however, although the 5G spectrum auction is happening as earliest as possible, it is likely to garner a lukewarm response from the telecom operators thus cutting down on the potential revenue that the government could have generated from this auction. According to the report, the government is expected to sell less than 10% of the total spectrum, which is available right now for the telecom companies. Another thing to factor in, in the case of the 5G auction is that, instead of the massive amount of Rs 5.22 lakh crore which the government could have netted if the entire airwaves were to be sold, will come down to only Rs 40,000 crore given the quantum of spectrum which will be bought in the upcoming auction.
Small Quantum of Airwaves to Sell in Upcoming Auction
Analysts are of the opinion, that the main 700 MHz premium spectrum which is the highlight of the auction and is usable for both 4G and 5G services will see light bidding because the telecom operators are financially stressed and are unlikely to divert their resources to purchase new spectrum. Rajiv Sharma, research head at SBICap Securities said about this, “Given the high reserve prices, acute balance sheet stress of older carriers and absence of an immediate 5G business case, the government is unlikely to see any meaningful take-up of pure 5G and 700 MHz airwaves.” He also added that the telecom operators are unlikely to buy even 10% of the total targeted spectrum which will be put up for sale in this auction.
On Friday, the Digital Communications Commission (DCC) approved the largest-ever spectrum auction in the country which is to be held sometime in March 2020. It was stipulated if the entirety of the airwaves are sold in this auction, then the government would net around Rs 5.22 lakh crore. In total, 8,300 units of 4G and 5G airwaves will be put for auction in this upcoming sale.
Exorbitant Pricing of Spectrum to Pose Another Hurdle
However, even with the biggest spectrum sale in the horizon for the telecom companies, there are many hurdles which will stop the telcos from bidding for the airwaves. Some of these reasons include insufficient spectrum and unavailability of newer, more efficient 5G bands like the 26 GHz one. Out of all the telcos, Vodafone Idea is going to be very selective while bidding for the airwaves as it is mounted with massive dues and burden on its balance sheet. Also, currently, the telecom operator is integrating its network across many circles. Even though some of the spectrum is expiring in 2021 for Vodafone Idea, the presence of backup spectrum is enough to ensure that Vodafone Idea will refrain from bidding too much.
Airtel, on the other hand, is expected to bid for 1800 MHz spectrum which the telco will lose in 2021 when that spectrum expires. Apart from this, the telco will also get the 2300 MHz spectrum for the urban circles. As for Reliance Jio, the telco’s focus would be on buying back the 800 MHz spectrum which it is using to relay 4G services in a spectrum sharing deal with Reliance Communications.
Airtel and Vodafone Idea Down With AGR Troubles
As per the recommendations of the Telecom Regulatory Authority of India (Trai), the per-unit price of the 3300 MHz to 3600 MHz spectrum is set at Rs 492 crore per unit. In contrast, the price of the 4G and 5G usable more premium 700 MHz spectrum is set at Rs 6,568 crore per unit. Given this high pricing and the burden of the AGR dues which are over Rs 90,000 crore for Bharti Airtel and Vodafone Idea combined are going to be major hurdles in government’s upcoming spectrum auction.
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.