All eyes on DCC

The Telecom Regulatory Authority has once again risen to the challenge and played the role expected of it. The Authority has put forward a mega auction plan valued at over ₹7.5 lakh crore at the base price across multiple bands for radio waves to be allocated over 30 years. The Authority has reiterated that the 39-percent drop in spectrum prices is rational, attractive, and backed by scientific calculations. And the recommendations on surrender fee, easy and flexible payment options, and leasing of spectrum for private networks, are all aimed at ease of doing business and attracting investment into the telecom sector.

The telcos are, at the minimum, looking to a fund requirement of ₹47,600 crore each, over the new 30-year validity span, considering at least 100 MHz of spectrum is required to offer any meaningful 5G services. The 3500-MHz band is priced at ₹320 crore per MHz and 700-MHz band at ₹3900 crore per MHz. This is only slightly below ₹49,200 crore that they would have paid over a 20-year span for 100 MHz of C-band spectrum at its earlier base price of ₹492 crore a unit. The debt levels are likely to rise further to ₹4.8 lakh crore by March 2023.

Having said that, financial analysts expect that Airtel and Jio are well positioned to participate in the upcoming 5G auctions while VIL’s participation will depend on the telco’s ability to find a strategic investor in the next 2–3 months. The auction, of course, may end at the reserve price.

The telcos, at their end, are hugely disappointed by the recommen­dations. Despite the government’s decision to allocate 5G spectrum for a period of 30 years, TRAI has recommended reserve prices for 20 years and applied a 1.5 times multiple to the price if spectrum is taken for 30 years. While revenues from the capital deployed in the spectrum bands are far lower than in other countries, the prices continue to be far higher, and a 90-percent cut in the reserve price of 5G spectrum from the 2018 levels is what it will take to get them somewhat at par with their international counterparts.

Reserving the 28-GHz spectrum band exclusively toward satellite communications is also a critical decision, sought by the satellite industry.

Setting aside spectrum for captive wireless private networks at an administered price defies the very business model of the telcos – the bulk of 5G revenues is expected from enterprises. The global private networks sector is forecast at USD 8 billion by 2026, up from USD 1.7 billion in 2021, no small number.

Final decision is now awaited from the Digital Communications Commission (DCC), the erstwhile Telecom Commission, and subsequently from the Union Cabinet.