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4G spectrum auctions: India may give temporary payment relief to telcos

India’s telecom operators may get some temporary relief from the country’s telecom department (DoT) in the upcoming 4G spectrum auction. While the department might not lower the base price for spectrum, it is all set to split the upfront payment that telecom operators need to make after winning fresh spectrum licenses.

The Department of Telecommunications (DoT), its draft cabinet note for inter ministerial consultations, has proposed taking 10% of the 25% upfront payment mandated for the spectrum in the sub-GHz bands like 700 Mhz, 800 MHz and 900 MHz, and the rest at the time of allotment, according to a report by the Economic Times.

For other bands like 1800 MHz, 2100 Mhz, 2300 Mhz and 2500 MHz the department plans to take 20% of the 50% upfront payment initially.

The move will allow the DoT to quickly allocate spectrum to telecom operators that need spectrum urgently. Spectrum licenses of all three telecom operators – Reliance Jio, Bharti Airtel and Vodafone Idea – will expire in July 2021.

The department, however, may not reduce a 3% usage charge (SUC) for spectrum. Indian telcos have previously urged the government to address the financial distress in the industry by reducing levies such as license fees and spectrum usage charge (SUC).

Through the draft note, the DoT is currently seeking inputs from various ministries on the next spectrum auction. After getting inputs from various ministries, the department will then take the proposal to the Cabinet within 15-20 days.

Telecom operators typically pay a part of spectrum price upfront and the balance over 16 years after a two-year moratorium, the report said.

The DoT has deferred the 4G spectrum auction in the January-March quarter despite an aggressive push from Reliance Jio for an urgent sale. India held its last auction in October 2016.

Reliance Jio, which has 400 million subscribers, recently wrote to the Prime Minister’s Office (PMO) and the DoT to conduct spectrum auctions at the earliest and have said that any delay would lead to serious issues around quality of services in terms of call drops. Jio also said that delay in auctions will hurt investors’ confidence and lead to losses to the government.

Jio’s own spectrum and those it has taken from defunct telco RCom are expiring in the 800 MHz band expires in 12 and 14 circles, respectively, in July 2021. Analysts said that Jio quickly needs to renew its existing spectrum and buy additional spectrum to further grow its user base. Jio is targeting 500 million mobile subscribers in the short to mid term.

Airtel and Vodafone Idea have around 280 million users each in India. They have reportedly told the government that there was no immediate need for an auction, citing their financial health.

Both telcos have spectrum in the 1,800 MHz band expiring across eight circles each. They however have a backup spectrum in most of these service areas.

India has already deferred the 5G spectrum auction to sometime in 2021 due to the financial health of Vodafone Idea and Bharti Airtel, and an underdeveloped local ecosystem around 5G technology. India has earmarked spectrum in the 3,300-3,600 MHz band or the mid-band for the next-generation 5G service. Disruptive Asia

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