Analysts, Telecom News, ET Telecom

NEW DELHI: No sale of the fifth generation or 5G spectrum in the upcoming auction would reduce the risk of telecommunications companies in financial distress burning more liquidity and allay investor concerns about an “ early rollout ” of upcoming services generation, market research firms say.

“No 5G auction reduces the risk of large cash outflows for telecom companies,” Axis Capital said in its research, adding that while deferral of 5G reduces the risk of large cash outflows for telecom companies to short term, it also gives time for development
of ecosystems and test cases around 5G.

In 2018, the Telecommunications Regulatory Authority of India (Trai) recommended 300 units in the 3300-3600 MHz frequency range to commercially implement 5G services along with a mega auction hovering around Rs 5.22 lakh crore. But, following the lack of a 125 MHz vacancy by the Department of Space (DoS) and the Ministry of Defense (MoD), the Department of Telecommunications (DoT) had only proposed 2251.25 MHz including 4G radio waves for sale in March 2021.

On Wednesday, the cabinet headed by Prime Minister Narendra Modi approved the department’s proposal which could fetch at least Rs 3,92,332.7 crore, considering the base price.

“This (no 5G auction) should help allay some investor concerns about the early 5G rollout and subsequent investment cycle for Indian telecom operators,” said Credit Suisse, adding that the development was in line with its expectations of 5G roll-out from FY2023 onwards.

Failure to include 5G spectrum in the sales proposition would also halt Jio, owned by Mukesh Ambani, to roll out 5G services in 2021.

“Instead, the department has ownership of only 175 MHz of spectrum in the proposed 5G bands, and at least 100 MHz per operator will be required for efficient 5G deployment,” an industry executive said.

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Reducing the spectrum limit to 55-60 MHz per operator for the auction with available radio waves, according to him, would not be a desirable option and could affect the quality of service offered by telecom carriers. Earlier this month, Ambani said its telecom business entity will launch next generation services later in 2021.

“I assure you that Jio will be the pioneer of the 5G revolution in India in the second half of 2021. It will be powered by internally developed networking, hardware and technology components,” the Asian billionaire said earlier.

In addition to insufficient spectrum in the bandwidth suggested by the regulator, the non-maturity of the 5G device ecosystem and the lack of field evidence would be detrimental to the commercial launch of the next generation of telecommunications services.

With the next auction around the corner, the Telecommunications Department’s Notice of Tender (NIA) is due to be released in the coming weeks, ”noted Axis Capital.

Credit Susisse predicts that renewing the expiring spectrum would cost Rs 150 billion for Bharti Airtel and Rs 115 billion for Jio.

Bharti Airtel led by Sunil Mittal has 12.4 MHz of spectrum expiring in the 900 MHz band and 47 MHz in the 1800 MHz range for renewal in CY2021. Rival Jio, which is using Reliance Communications (RCom) 44 MHz spectrum in the 800 band via spectrum swap, will expire in CY2021.