Why are the recently concluded 5G spectrum auctions significant?

India’s much-awaited 5G spectrum auctions concluded with 51,236 MHz of spectrum being acquired by the three incumbent telecom operators Reliance Jio, Bharti and Vodafone Idea, and new entrant Adani Data Networks for a total consideration of ₹1.5 lakh crore. The spectrum auction marks a turning point for India’s telecom market. In addition to improving mobile broadband, 5G technology will enable the delivery of critical services such as telesurgery and the Internet of Things over a mobile network with unprecedented efficiency, in addition to opening the floodgates for innovative applications that require a massive amount of high-speed bandwidth. Globally, many countries including the US have already launched 5G services.

When can consumers in India start using 5G services?

Indian consumers can hope to get 5G services in metro areas to start with by October. But operators still have a tough road ahead when it comes to execution. They have an extremely expensive capex cycle ahead of them for the next few years, even as the pricing dynamics in India are usually slow moving amid resistance to paying premium prices for telecommunication services. Which means that transition to 5G services could be slow moving and restricted to certain urban centres for the next few years. The initial launch of 5G is likely to be restricted to one or two major metros.

Will users need new handsets for 5G services?

Your mobile handset must be enabled with 5G capabilities. 5G enabled mobile handsets are usually more expensive and according to a recent report by CounterPoint Research, only 15 to 20 per cent of handsets currently sold in India are 5G ready.

Will the service be expensive compared to 4G?

Given the massive capex demands, 5G telecom plans will also be more expensive. The first consumers for 5G will be in urban areas and people who can afford expensive smartphones and premium tariff plans. Given the geopolitical uncertainties as well as the consequent macro and supply chain uncertainties, the road towards a mature and all pervasive 5G network is a long one. Consequently, telecom operators also have to take the call regarding whether they should conduct a more slow or aggressive rollout of 5G services.

All indicators suggest that the evolution to a mature 5G ecosystem will be a slow one. Utlimately the Indian consumer should get used to the idea of paying more for telecommunication services. Since Jio’s 4G revolution, India has enjoyed some of the cheapest tariffs across the globe. Leading up to the auctions the industry already took a 20 per cent hike in tariffs last winter.

Given that telcos were more aggressive in the auctions than expected, analysts predict that the telecom industry is preparing for another bout of tariff hikes. 5G mobile plans and the surrounding ecosystem will also become expensive going ahead. Operators are likely to charge a premium for 5G services. However, 5G or no 5G, mobile subscribers will be paying more for the services.

Which operator is better placed to offer 5G services?

Nearly 60 per cent of the spectrum sold by value was bought by Reliance Jio for ₹88,100 crore. Jio is the only operator to acquire spectrum in the all-important 700MHz which was priced so high that no other player could acquire it. This gives Jio a massive advantage over other players because 700 Mhz is considered to be best for indoor coverage. In addition, Jio has amassed the highest amount of 5G spectrum in 3.3GHz and 26GHz. Its nearest rival, Bharti Airtel bought spectrum worth ₹43,100 which will help it to become the only other pan India 5G operator.

Weighed down by dues, Vodafone Idea was subdued in its auction play and bought 5G spectrum only in certain circles.

Jio was strategic with its aggressive spectrum play, with the aim to have the best possible to airwaves to set up its 5G network, as well as deny Bharti Airtel access to high quality airwaves in certain geographies by buying them instead. This will make it harder for Bharti to deploy a quality 5G network.

However, Bharti Airtel’s past history indicates that Sunil Mittal has always played the prudent fiscal game, which has always provided quality returns to the company. Analysts believe that Jio has overextended itself financially to make this spectrum buy, which Airtel can use to its advantage.

What about the new player in the fray -- Adani?

Adani bought limited spectrum in 26MHz- specifically for private network services. Private networks is another use case that telecom operators are exploring for 5G. In this domain they have competition from players that usually do not dabble in telecommunications. This includes Adani, Tata and other tech majors. The private network story will however take more time to unfold.

It all depends on how Adani utilises the spectrum it has purchased and how soon the government firms up regulations on private networks. Telcos are likely to block the entry of other firms into the private network space. Voice and data services will however provide the most revenue for 5G in the near term.

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