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Can 5G spectrum price cut boost Indian telecom industry, Business Standard

India is slated to hold the 5G spectrum auction later this year. And the launch is envisaged in 2023. The 2016 and 2021 auctions ended on a whimper as more than 60% of the spectrum put up for sale remained unsold.

Looking to avoid a repeat of the last two auctions, the Telecom Regulatory Authority of India has recommended a 36% cut in the reserve price for the prime 5G frequency of 3.3 to 3.67 GHz band for a pan-India use.

This frequency, also called the mid-band 5G spectrum, has become the basis for the first implementations of 5G globally as it provides the right balance between coverage and capacity.

Many countries around the world have already earmarked the mid-band spectrum for 5G. It can carry large amount of data while also achieving greater geographic coverage.

The base price per megahertz has been cut from Rs 492 crore to around Rs 317 for a 20 year allotment. While this works out to around a 36% reduction, it is much lower than the industry demand, which was up to a 90% cut.

In line with global trends, telcos in India will look to acquire 100 MHz of mid-band spectrum to run an efficient network, which at the base price will cost them Rs 31,700 crore for 20 years.

An industry expert said that telecom companies would also need a large quantum of spectrum in the premium 700 Mhz band for a reliable 5G network.

Telecom companies have already conducted 5G trials in the 700 MHz, 3.5 GHz, and 26 GHz bands.

The reserve price for the 700 MHz band has been cut by 40% to Rs 3,927 crore per MHz for a 20-year pan-India coverage. The recommended base price is also 60% lower than the 2016 price.

This band found no buyers in the last two rounds due to the extremely high reserve prices. This time it may see some demand.

Low-frequency bands are ideal for use in rural areas, while they also help to improve indoor coverage in urban areas.

ICICI Securities has however said the spectrum prices for 700MHz “still remain expensive”. We can still expect to see some action in the upcoming auction.

While Bharti Airtel and Reliance Jio are well placed to participate in the auction, Vodafone Idea’s ability to compete is constrained due to a weak balance sheet. Without significant fundraising, Vodafone Idea may be left behind. Analysts say this would lead to further market share gains for Jio and Airtel.

TRAI has also recommended that telcos be allowed easy payment options, including part payment with the flexibility of moratorium. The government has to approve rhe regulator’s recommendations before going ahead with the auction. How far will TRAI’s recommendations go in generating interest in telecom companies for the 5G auction, only time will tell. Business Standard

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