December 23, 2019
India is set to conduct one of its biggest spectrum auctions by the end of April 2020. If all goes to plan, the bids for the spectrum sale, which will include frequencies for 5G services, will open on January 13, 2020.
Whether or not the country's operators participate, though, is another matter.
The auction will include the sale of almost 8300MHz of airwaves, including 5G spectrum in the 3.3-3.6GHz band and 4G spectrum in the 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz bands.
There are still some hurdles to clear before the auction can take place. While the Digital Communications Commission (DCC) has approved the recommendation of the Telecom Regulatory Authority of India (TRAI) to hold the auction, the sale process still needs final approval from India's Cabinet of Ministers.
But, as ever, the move is not without controversy, as the reserve price of around US$73.39 billion for all the spectrum on offer has been deemed as too high by the industry and analysts: In particular, the reserve price of INR65.68 billion ($923 million) per unit of the 700MHz spectrum has come in for severe criticism. This spectrum had remained unsold in the 2016 auction, when the Indian authorities had set a reserve price of INR114.85 billion ($1.61 billion) per unit.
The reserve price for the 5G spectrum is INR4.92 billion ($69.2 million) per unit.
India's mobile operators have been demanding lower reserve prices and a postponement of the auction, citing financial stresses and strains as the main reason. The industry is burdened with enormous debt, and all but one telco -- Reliance Jio -- have reported losses in the past few quarters: Even Jio is in favor of postponing the auction. The Cellular Operators Authority of India (COAI) recently suggested that the large incumbent operators, Bharti Airtel and Vodafone Idea, are unlikely to participate in the auction.
Part of the current financial burden is the result of the recent Adjusted Gross Revenue (AGR) judgment, which resulted in demands for INR920 billion ($12.9 billion) in payments from the service providers. The judgment is for a 15-year old dispute on whether the non-telecom revenue of service providers should be included in the telecom license conditions. This judgment especially has significant ramifications for Vodafone Idea, which will see its entire cash balance totally wiped out if it is forced to pay. Such burdens, along with tough trading conditions, will make it extremely tough for the operators to generate funds to aggressively participate in the auction.
In addition, the industry consensus is that the market is not yet ready for 5G: The telcos are still seeking a return on investment for their 4G spectrum and network outlays. The lack of defined 5G use cases and the yet-to-develop device ecosystem is also contributing to the Indian telcos' reluctance to invest in 5G spectrum right now.
There may be some demand for 4G spectrum, particularly from Airtel and Vodafone Idea, which need to buy back spectrum in eight circles (service areas). However, there's a chance that the still expensive 700MHz and the 5G spectrum opportunities may be largely ignored by the cash-strapped operators unless reserve prices are reduced.
India is one of the largest telecom markets in the world: It has 1.17 billion mobile connections (of which 960 million are active mobile connections), with Vodafone Idea the largest (31.7% market share), followed by Reliance Jio (30.1% share), Bharti Airtel (27.7% share) and state-owned BSNL (10% share), according to statistics for September 2019 shared by the TRAI (Telecom Regulatory Authority of India).
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— Gagandeep Kaur, contributing editor, special to Light Reading
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