5G Spectrum Auction: DoT in Favour of a Price Cut for 5G, 700MHz Bands

Ahead of the 5G Spectrum Auction sometime in 2022, DoT believes that a cut in base price of 5G and the 700 MHz bands will attract better bidding from the telcos.

Positive Signs Ahead of the 5G Spectrum Auction

A senior official, cited by ETTelecom, said, “it is best if the telcos push their case again with TRAI, and a reduction in price and lesser upfront payment is the best way ahead”.

At the March auction, only 37% of the over 2,300 units of spectrum across seven bands found a buyer. However, the 700 MHz band went unsold for the second time. The telcos cited high base price for the highly efficient band.

TRAI tried selling off the 700 MHz spectrum at the March auction, reducing the price to Rs. 6,568 crore per MHz for pan-India spectrum. However, the band again went unsold.

DoT is also seeking a new, reduced base price of the frequencies already earmarked for 5G. These include the 3.3 GHz-3.6 GHz band, among others. After this, TRAI will have to start a consultation process, which usually takes months, to arrive at new prices. Usually, the regulator reduces the prices of unsold spectrum.

The Telcos' Demands

The telcos might ask for as much as a 50% decrease in the base price, industry experts say. They will also seek an increase in the spectrum payment moratorium period beyond two years. The telcos will also seek a reduced upfront payments at the 5G Spectrum Auction, in 2022.

Earlier on, DoT had accepted TRAI's recommendation of Rs. 492 crore per unit for 5G spectrum in the 3.3-3.6 GHz bands. However, the telcos unanimously rejected this, saying that they won’t bid at these levels. Interestingly, a CLSA report said that 5G pricing is the highest in the world in the country. So much so, that the UK has a pricing seven times cheaper than India.

Then there is the case of the payment moratorium. Right now, winning bidders can pay the entire amount upfront, or 25% to 50%, paying the balance over a maximum of 16 installments after a moratorium of two years. However, telcos are demanding that both the upfront payment be reduced and the moratorium be increased.

A Stalemate Imminent?

Kunal Vora, Senior Telecom Analyst, BNP Paribas, said, “reserve price of the 700 MHz spectrum is too high and the band has not seen any demand in successive auctions. We do not expect it to change unless the reserve price is lowered sharply”.

The mid-band spectrum will be the most popular choice for the 5G rollout in India. However, the telcos will require a large amount of spectrum in these bands to rollout a proper 5G network. The pricing of these bands can prove to be a spanner in the works, given the high debt of the telcos.

As things stand, we can see little to no bidding at the 5G Spectrum Auction, as telcos such as Bharti Airtel and Reliance Jio already have a 4G band - the 800 MHz band - that can support 5G.