Will Airtel miss 5G play. Will Airtel miss 5G play if it skips 700MHz in future auctions?

Bharti Airtel’s decision to skip the 700MHz band in spectrum auctions was expected, but can the operator afford to not buy bandwidth in this frequency band in the next round of auctions?

According to media reports, a top executive at Bharti Airtel noted that the company will not bid for 700MHz in future auctions, as it has sufficient 5G spectrum for quality 5G launches.

Experts note that there is a possibility that Reliance Jio will be able to eat into Airtel’s premium subscriber base if Airtel does not bolster its sub-GHz presence soon.  Reliance Jio made a surprise acquisition of 10 MHz in the 700MHz, in the recent 5G auctions, ensuring that their 5G network will likely have superior voice quality over Airtel, according to experts.

A top analyst concluded that it all comes down to how Reliance Jio executes its 5G network rollout. “Whether the  700MHz band is integral for 5G in the near- to mid-term is a billion-dollar question,” said the analyst. According to experts, a lot of contingencies regarding the new 5G technology will need to be considered — this includes the time it takes for the ecosystem around 5G to develop and proliferate, the cost of handsets to go down, semiconductor shortage to resolve and geopolitical issues to conclude. 

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There is a multitude of reasons behind Airtel likely giving 700MHz a miss in future auctions as well. First and foremost, the price of 700MHz will not go down in the next auctions, since Reliance Jio has locked the current price of the spectrum by buying it in the recently concluded auction. A senior executive said: “Unlike Reliance Jio, Airtel has sufficient spectrum in the mid-band (1,800MHz and 2,100MHz) to launch a robust non-standalone network on a 4G core.” According to the expert, Reliance was compelled to buy 700MHz in these auctions, because it has a lesser mid-band spectrum in comparison to Airtel, thus it has no other choice but do a standalone deployment of 5G for which 700MHz is necessary. While most experts note that a standalone deployment of 5G is superior to a non-standalone 5G network deployment, the expert noted that reasonable 5G services are being provided on non-standalone networks in many advanced economies such as South Korea. Thus, the expert concluded that as long as the prices of the 700MHz spectrum remain high and there is a limited proliferation of 5G networks, it could be prudent for Airtel to skip 700MHz in the next round of auctions as well

A school of analysts note that the proliferation of the mature 5G ecosystem will take time in India. A mature 5G ecosystem will have relevant use cases for Indian consumers, the reasonable proliferation of the 5G network, affordable handsets. In this case, Airtel has ample time to purchase the sub-GHz spectrum, and can thus afford to skip the 700MHz band, according to analysts. Top industry executives also noted that Airtel has had a history to make fiscally prudent decisions when it comes to capital expenditure, which puts it at an advantage over Reliance Jio, which has created a massive financial exposure for itself during these auctions. “Based on Airtel’s bidding strategy for the recently concluded 5G auctions, they will be paying almost nothing in their yearly payment instalments for 5G spectrum, since they made massive savings in spectrum usage charges. On the other hand, the 700MHz buy by Reliance means that it will owe substantial dues to the government,” said an expert. Therefore, the expert concluded that Airtel’s prudent business practices, along with a better management track record, could still mean that it gives Reliance Jio a run for its money, even if it avoids buying 700MHz in the future.

However, another school of analysts believe that Airtel’s decision to likely skip 700MHz in future auctions could be similar to Vodafone Idea’s fateful decision to skip buying 4G spectrum in 2016. Vodafone Idea’s late entry into the 4G race is one of the core reasons behind its current demise. “If Reliance Jio executes its 5G network well and there is a rampant proliferation of 5G services just like India’s 4G revolution, it will be extremely necessary for Airtel to purchase 700MHz in the next auctions to catch up with Jio,” said an expert.

“At present, Airtel has time to catch up with Reliance and buy sub GHz spectrum next year and still be a veritable competitor to Jio. However, it is important that it buys 700MHz next year and not completely miss out on the 5G party.” Airtel did not revert to BusinessLine’s e-mail seeking additional comments.  

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