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5G spectrum auctions may not see bidding war because there is ‘enough’ for everyone

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  • 5G Spectrum Auctions are almost there after years of delay.
  • Now that the AGR cost case is over, telcos and the government are working together to meet each other’s needs.
  • Still, 5G spectrum auctions may not offer the bumper crop that 4G did.
  • We decipher all the reasons why telcos must be slow to bid on 5G spectrum.

The government has pinned its hopes on record profits from 5G spectrum sales to bolster its revenues, but experts suggest it should temper its expectations and not expect a repeat of 4G spectrum auctions.

5G spectrum auctions are scheduled to begin on July 26, 2022.

All three leading telcos – Trust Jioairtel and Vodafone idea – have tested their networks and shown that they are ready for 5G. But the government has pushed back the auctions – to settle the lingering issue of AGR rights.

The Indian telecom ministry and the regulator took action to speed up the auction process. But the first roadblock came in after the telcos asked the government for a 90% cut in base spectrum prices. However, the government has reduced them by only 40%.

The government is counting on spectrum auctions to fill its treasury at a time when the budget deficit rose to 12% of its budget estimate in April and May, up from 8% in the same period last year.

The LIC’s IPO came to a halt, soaring inflation and the rupee hit record lows in the past week, resulting in a drop in billions of dollars in forex reserves – there are several reasons for the government to get the most out of the telcos.

However, given the way policies for using 5G spectrum are evolving, a bumper crop as was the case with 4G appears to be difficult.

Why the government shouldn’t expect a huge harvest from 5G spectrum auctions

The last major spectrum auction to take place was that of 4G spectrum in 2021 – this was after the telecom industry went through years of distress and consolidation following Jio’s entry in 2016.

The government took ₹77,800 crore from the auctions, despite only a third of the spectrum being acquired by telcos. Telcos also bid strategically on the spectrum – with the bulk of purchases in the mid-range, which can deliver speeds of 100-900 Mbps.

“Don’t expect a bidding war. There is more than enough spectrum available for the three operators,” said a report from JP Morgan.

That and getting less than the desired price cut leaves telcos with little motivation or the need to bid aggressively on 5G spectrum.

Also read:

INTERVIEW: The big picture on 5G, Big Tech telco war with COAI’s Dr SP Kochhar

5G spectrum auctions are almost here after years of delay. Now that the AGR cost case is over, telcos and the government are working together to meet each other’s needs. Still, 5G spectrum auctions may not offer the bumper crop that 4G did. We decipher all the reasons why telcos must be slow to bid on 5G spectrum.

Private 5G networks can also be a bummer

The government allowing private 5G networks — that is, companies like TCS, for example, can run their own private networks by bidding on the category in question — has also thrown up the hackles of telcos.

COAI, the industry association that represents telcos, has asked the government to impose “hard conditions” to allow private companies to operate their own 5G networks.

COAI’s director-general Dr SP Kochhar told https://londonbusinessblog.com/ India that companies are likely to contribute to 70% of 5G revenues, and if telecom companies cannot serve Big Tech, they will have to prepare new business plans.

“Relatively high prices and the risk of dilution for the telcos, with DoT approving the direct assignment of spectrum to companies for deploying private networks, are negatives,” according to a report from IIFL Securities.

Essentially, the customers trying to bring in telcos as 5G consumers will become competitive bidders.

Sharing Spectrum – Sweetener for Telcos, Acid for Government

Another reason why the 5G spectrum auction could disappear is spectrum sharing – according to a report, TRAI is apparently considering allowing telcos to share ether.

This solves two problems: first, telcos can monetize spectrum where they have excess, or if they need extra spectrum but don’t own it in a certain circle, they can lease it from another telco. This should also eliminate the liquidity problems for the telcos involved.

Second, telcos will also be discouraged from having idle airwaves.

“But with only three players in the market, only two of which are looking for serious investment, and the government’s plan to offer spectrum on an annual schedule, the need to invest at a high cost seems limited. said a report by Motilal Oswal.

Also read:

5G in India - does the aam aadmi even need it?

5G in India – does the aam aadmi even need it?

5G spectrum auctions are almost here after years of delay. Now that the AGR cost case is over, telcos and the government are working together to meet each other’s needs. Still, 5G spectrum auctions may not offer the bumper crop that 4G did. We decipher all the reasons why telcos must be slow to bid on 5G spectrum.

Although spectrum sharing exists today, it is restrictive and both telcos must have licenses in the same circle and frequency. TRAI is
explore lifting these restrictions.

However, if this continues, the government may be pulling even less money from auctions.

How telcos can bid on 5G spectrum?

Analysts at IIFL Securities believe that telcos could only go for 4 out of 10 bands, with Jio and Airtel topping up their sub-GHz positions.

For now, telcos are likely to focus on the critical 850MHz and 900MHz frequencies, while the more expensive 600MHz and 700MHz frequencies may not take action, the report added.

The mid-range, where telcos already have more than 670MHz spectrum, may not see any action.

Overall, the report concludes that telcos could bid for spectrum worth ₹71,000 crore – significantly lower than the ₹78,000 crore the government raised from 4G spectrum auctions.

$BHARTIARTL.NSBasically, a consistent increase in revenues is noted each quarter with increasing net profits. The number of subscribers to telecom companies is increasing every month, the financial ratios are getting healthier. Technically, the stock has broken the downward parallel channel and has seen a huge volume buy with decent delivery last week. Once the 100 and 200 EMA are broken, a decent rise can be seen.

— (@tradegainers) June 27, 2022

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