Decks cleared for 5G spectrum auctions worth ₹4.50-lakh crore

S Ronendra Singh | Updated on: Jun 15, 2022
The auctions will kickstart from July 26 and a total of 72,097.85 MHz of spectrum with a validity period of 20 years will be put to auction

The auctions will kickstart from July 26 and a total of 72,097.85 MHz of spectrum with a validity period of 20 years will be put to auction | Photo Credit: KAI PFAFFENBACH

Cabinet also approves private captive networks for enterprises

Decks have been cleared for the much-awaited 5G spectrum auction with the Union Cabinet on Wednesday approving a Department of Telecommunications‘ (DoT) proposal to assign spectrum to successful bidders for providing 5G services to public and enterprises.

The auctions will kickstart from July 26 and a total of 72,097.85 MHz of spectrum with a validity period of 20 years will be put to auction. Spectrum in various frequency bands — low (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz), mid (3,300 MHz), and high (26 GHz) — will be auctioned. The final list of bidders will go live on July 20 and there will be mock auctions on July 22 and 23, according to the Notice Inviting Applications (NIA).

Going with TRAI recos

The Cabinet has gone along with the pricing recommendations of the Telecom Regulatory Authority of India (TRAI) which had set a 39 per cent cut in the reserve or floor price for the 5G spectrum sale for mobile services. Accordingly, the sale value as per the base reserve prices is around ₹4.5-lakh crore. Telcos, on their part, had asked for a 90 per cent cut in the reserve price of airwaves from the 2018 levels.

TRAI on April 11 had recommended a base price of ₹317 crore a unit for the premium 3.3-3.67 GHz band, a 36 per cent reduction to its last recommendation in 2018. It also cut the recommended price for the 700 MHz spectrum by 40 per cent, to ₹3,297 crore a MHz, to make it attractive to telcos for bidding because it remained unsold in the last two auctions (2016 and 2021).

It is expected that the mid and high band spectrum will be utilised by telecom service providers (TSPs) to roll out 5G technology-based services capable of providing speed and capacities, which would be about 10 times higher than what is possible through the current 4G services, the government said.

Private captive networks

The Cabinet simultaneously decided to enable the creation of private captive networks to spur a new wave of innovations in Industry 4.0 applications such as machine-to-machine (M2M) communications, Internet of Things (IoT) and artificial intelligence (AI) across the automotive, healthcare, agriculture, energy and other sectors. BusinessLine had, on June 13, reported that DoT had agreed to give telecom spectrum to captive players for the private use of airwaves in campuses like factories, hotels and universities.

The decision has conflicting views on this from two major industry bodies — the Broadband India Forum (BIF) which wants the spectrum allocated to private captive enterprises and the Cellular Operators’ Association of India (COAI) which wants to restrict it for TSPs.

COAI had also written to the Telecom Minister recently saying: “If private captive networks for enterprises are set up independently by other entities, then this would mean dramatically altering the industry dynamics and hurting the financial health of the industry.”

Spectrum details

For the first time, there is no mandatory requirement for upfront payment by the successful bidders also. Payments for the spectrum can be made in 20 equal annual installments to be paid in advance at the beginning of each year. This is expected to ease cash flow requirements and lower the cost of doing business. The bidders will be given the option to surrender the spectrum after 10 years with no future liabilities on the balance instalments.

“The spectrum auction will be benefitted by the telecom sector reforms announced in September 2021. The reforms include zero spectrum usage charges (SUC) on the spectrum acquired in the upcoming auction, providing a significant relief to the service providers in terms of the operating cost of telecom networks. Further, the requirement of submitting a financial bank guarantee equivalent to one annual instalment has also been done away with,” the government said.

According to rating agency ICRA, the telecom industry may shell out around ₹1-1.1-lakh crore on the upcoming spectrum auctions, and given the relaxed payment terms, the upfront outgo is likely to be around ₹10,000 crore for the industry.

Prashant Singhal, EY Global TMT Emerging Markets Leader, said: “One of the key highlights of the 2022 spectrum auction is abolishing SUC. This is a positive move and is in line with TRAI’s recommendation. SUC paid by operators currently varies between 3-5 per cent of adjusted gross revenue (AGR) depending on the year of acquisition and the zero per cent SUC will be a welcome relief to operators and enable a faster 5G roll-out.” He added that 5G is a key driver for growth and the start of this auction process is a big move ahead.

Published on June 15, 2022
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