Spectrum auction indicates operators gearing up for 5G transition

Our Bureau. Mumbai | Updated on March 02, 2021

Access to cheaper 700 Mhz band in the next round of auction will be crucial

The outcome of the spectrum auction indicates that Reliance Jio and Bharti Airtel are gearing up to offer 5G services. While most of the acquisitions have been to renew spectrum in circles where they are expiring, both operators have consolidated their holding in the sub-GHz frequency bands, which is ideal for 5G services.

Reliance Jio has acquired 133 Mhz of fresh spectrum in the 800 Mhz band. Jio now has the highest amount of sub-GHz spectrum with 2X10 Mhz contiguous spectrum in most circles. (2X10 Mhz means that the operator has 10 Mhz spectrum for transmission and another 10 Mhz for receiving voice/data.)

RJio also has at least 2X10 Mhz in the 1,800 Mhz band and 40 Mhz in the 2,300 Mhz band in each of the 22 circles. The acquired spectrum can be utilised for transition to 5G services at the appropriate time, wherein Jio has developed its own 5G stack.

Bharti Airtel has acquired 355.45 Mhz spectrum across sub-GHz frequency bands. Airtel has now secured a pan-India footprint of sub-GHz spectrum that will help improve its deep indoor and in-building coverage in every urban town. The spectrum acquisition will also enable Airtel to deliver 5G services in future. In addition, this spectrum will also help improve its coverage in villages by offering superior services to an additional 90 million customers in India

Mobile broadband

“The telcos not only bid for renewals of the expiring spectrum but also focussed on consolidating their spectrum holdings in the 800 MHz, 900 Mhz and 2,300 MHz bands,” said Ankit Jain, Assistant Vice President, ICRA. “While the sub-GHz bands will be crucial for 5G technology deployment going forward as well as improvement of indoor coverage, the appetite for the 2,300 MHz band stems from the rising mobile broadband usage and thus the need for improving network capacity.”

Sub-Ghz bands are spectrum below the 1,000 Mhz frequency. This includes the 900 Mhz, 800 Mhz and the 700 Mhz bands. These bands are optimum for mobile services due to their better propagation properties compared with spectrum in the higher bands such as 2,100 Mhz and 2,300 Mhz.

However, the 700 Mhz band did not receive any bids due to its high reserve price. This is the second time this band is going unsold due to the high price. This band is the most important band for 5G services as it has enough bandwidth to allow each operator to take up to 30-40 Mhz each.

“While the spectrum bought by the operators can give them a start into 5G, access to the 700 Mhz band will be crucial because 5G needs adequate spectrum. So the government will have to rethink about the reserve price,” said Prashant Singhal, Emerging Markets Leader of Technology, Media & Entertainment and Telecommunications at EY.

The ₹77,000-crore payout for spectrum will add to the industry’s overall debt, taking it closer to ₹5-lakh crore. Operators will have to think about how to fund the spectrum acquisition and new revenue models will have to be thought through.

“While the value of total spectrum sold is only 19 per cent of the total value of spectrum on offer, post the auctions, the debt levels of the industry would increase further to around ₹5-lakh crore as on March 31, 2022, and despite the improvement in the operating metrics, the debt protection metrics will continue to remain weak,” Jain said.

And then there were three

There was also no competitive bidding for any spectrum. Most bids were at the reserve price. This means that the operators went in with a clear strategy on how much spectrum they wanted to acquire and that the bidders did not indulge in undercutting each other’s plan.

“The level of competition is now down to just three operators and this auction showed that there is hardly any fight for spectrum, unlike a few years ago. While the government should be appreciated for putting all the spectrum available for sale and not creating an artificial scarcity, the auction design must be re-looked,” said an industry analyst.

Published on March 02, 2021

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