Telcos cautious: ‘Tepid response likely for spectrum auction’https://indianexpress.com/article/technology/tech-news-technology/telcos-cautious-tepid-response-likely-for-spectrum-auction-5314872/

Telcos cautious: ‘Tepid response likely for spectrum auction’

While the Trai may have reduced the reserve price by 43 per cent for 700 MHz compared to the 2016 levels, it’s still on the higher side. At Rs 6,568 cr per MHz, operators will have to shell out Rs 32,840 crore for a pan-India 5 MHz.

5g services, 5g mobile services, 5g spectrum auction, telecom regulatory authority of india, department of telecommunications, 5g service spectrum, trai 5g in india, 5g capable devices
One of the reasons for the possible tepid bidding is that barring the premium 4G 700 MHz and the 5G spectrum in the 3300-3600 MHz band, operators have sufficient spectrum holding bought in previous auctions and also through acquisition of smaller operators.

The next round of spectrum auctions is set to witness a lukewarm response from telecom companies, potentially denting the government’s non-tax revenue for the fiscal. This is despite the Telecom Regulatory Authority of India (Trai) earlier this month recommending the reserve price for the auctions and advising the government not to delay the auction process.

One of the reasons for the possible tepid bidding is that barring the premium 4G 700 MHz and the 5G spectrum in the 3300-3600 MHz band, operators have sufficient spectrum holding bought in previous auctions and also through acquisition of smaller operators.

Since the number of players in the industry has also come down, the scarcity of spectrum is no longer there, which means that there’s enough left for everyone. As regards 700 MHz and 3300-3600 MHz, the eco-system is yet to be fully developed so these cannot be deployed immediately.

Further, currently operators are in the process of rolling out their 4G networks on the spectrum they hold. Even for Jio, which has put into use all its spectrum, the utilisation level is only 20 per cent so the company is hardly in need to acquire more.

Advertising

Top operators have significantly improved their spectrum footprint via bidding in the prior auctions and acquisition of smaller operators, and they are still in the process of rolling out 4G networks on the existing spectrum.

“Participation in auctions may happen once the ecosystem matures and network capacity constraints on the existing spectrum start becoming visible. In our view, that is some time away,” analysts at brokerage Morgan Stanley wrote in their report.

The balance sheet leverage of the operators remains elevated and this will also be a major cause for going slow in further acquisition of spectrum through auctions. While the Trai may have reduced the reserve price by 43 per cent for 700 MHz compared to the 2016 levels, it’s still on the higher side. At Rs 6,568 crore per MHz, operators will have to shell out Rs 32,840 crore for a pan-India 5 MHz.

For the 5G band in the 3300-3600 MHz, where the prices have been given for the first time, at Rs 492 crore per MHz, for a pan-India minimum block of 20 MHz, operators will have to shell out Rs 9,840 crore, which is seen as steep.

“Industry revenue and profitability has worsened significantly post previous auction which is not reflecting in the spectrum price recommended by Trai, in our view. Incumbents are yet to deploy some of their existing spectrum and we see minimal demand from them in the medium term,” BNP Paribas noted in its report. —FE