India delays 5G spectrum auction on financial woes

India's 5G auction is unlikely to be held before August after authorities were forced to postpone the sale, scheduled for April 2020, because of the sector's financial difficulties.

It is not the first time the spectrum auction has been delayed. The award of frequency licenses for new 5G services was originally supposed to happen in 2019 before it was pushed back to April this year.

A key reason for the latest delay is the financial health of the service providers, which have been struggling to pay licensing fees and other penalties the government says they owe. Bharti Airtel and Vodafone Idea already had significant debts and would struggle to participate in the auction in the current circumstances.

The government is demanding billions from the operators, arguing that non-telecom revenues should be subject to licensing fees under so-called AGR (annual gross revenue) rules. The country's top court recently sided with the government in this dispute, meaning operators collectively owe 920 billion Indian rupees ($12.5 billion) in fees, penalties and interest payments. (See India court decision a massive blow for telcos.)

Authorities and operators have also clashed over the calculations of AGR dues. Reconciling the huge discrepancy between government and industry figures is unlikely to happen quickly and is another reason for the latest auction delay.

That auction, when it happens, will involve the sale of 8,300MHz of 4G and 5G spectrum, including 4G spectrum in the 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz bands, along with 5G spectrum in the 3300-3600MHz range The government could earn as much as INR5.23 trillion ($70.9 billion) from the auction, based on the reserve prices for the spectrum.

The telcos were concerned about these figures even before the AGR judgment in October 2019. After paying their AGR dues, they would clearly not be in a position to buy spectrum at these base prices.

Bharti Airtel has previously suggested it may sit out the auction unless base prices are cut. Vodafone Idea has been struggling to pay off its debts and its very survival after the AGR ruling looks in doubt. (See Vodafone's never-ending Indian agony and Can Vodafone Idea survive in India?)

Today, RJio is the only profitable service provider in the country and is already thought to be working on 5G technology. It might be the only telco with the financial muscle needed to acquire 5G spectrum. (See India's RJio wants to develop its own 5G.)

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The Department of Telecommunications (DoT) cannot delay the sale of spectrum to later than September 2020 because some of the 4G spectrum licenses held by Bharti Airtel and Vodafone Idea are set to expire in a few service areas in 2021.

The delay to August or September 2020 might help the DoT to generate better results from the auction. But the hold-up will clearly hinder the rollout of 5G services in India.

Swedish telecom vendor Ericsson has decided that 5G will not be available in India until 2022, having originally forecast that services would arrive this year. India's government was previously keen for the industry to introduce 5G in the country by 2020.

— Gagandeep Kaur, contributing editor, special to Light Reading