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Department of Telecom Examines 5G Pricing Model

The department of telecom (DoT) is examining industry inputs as well as global 5G spectrum prices, wherever it has been auctioned, vis-à-vis the telecom and regulatory authority of India (Trai) proposals to see if the recommended price points are higher by any measure and if the telcos would bid for them as and when auction takes place or these prices would need revision.

Though it is too early to take a call but whenever the auction takes place, spectrum should be sold, a senior DoT official said and added, we have to see what the global pric-ing model of such (5G) bands are.

An operator would need to pay Rs 9,840 crore for 5G spectrum on the pan-India basis as the telecom regulator has suggested that the auction should be “in the block size of 20 mega hertz (MHz).” The recommended base price is 30 per cent of the price of 1,800 MHz band and the regulator has proposed a limit of 100 units of spectrum per bidder to avoid monopoly.

According to industry experts, Trai’s suggested base price of Rs 492 crore per unit of 3,500 MHz 5G spectrum is much higher than Rs 65 crore per unit achieved at a recent 5G auction in South Korea. “Trai’s 5G spectrum base price is 7.5 times the market-discovered price in South Korea,” says a telecom operator.

The UK’s biggest mobile operators spent about £1.4 billion to acquire 5G spectrum earlier this year, with Vodafone winning 50 MHz in the 3.4 GHz frequency band by paying £378 million and BT-owned EE getting 40 MHz paying £303 million. BT-owned EE acquires 40 MHz by paying £303 million (Rs 2,673 crore) giving a per mhz price of Rs 67 crore.

The government raised only Rs 65,789 crore in 2016 of the estimated Rs 5 lakh crore as 700 Mhz remained unsold on which the auction value was riding and also there was lukewarm response to the auction . This time the government has 8,500 Mhz of spectrum to sell.

A senior executive of a telecom operator said 5G is not for consumers. It is for businesses and allied applications like healthcare, smart cities, education and agriculture. So making money from 5G spectrum is not easy and quick.

The financial position due to high competition is at peak , how can we block money in 5G when we know 4G capex also needs to be taken up and also the payment of spectrum dues payment, the official said. No fresh investment is being seen by any telco at this stage for any new area, the official added.

DoT is also concerned about the Rs 5 lakh crore debt of telcos, 85 per cent of which is due to loans taken by them for paying spectrum dues to the government in 2016. Indian radio waves are considered most expensive in the world.

Sources said DoT is aware of the poor financial situation of telecom operators. Telcos have told the department that they could be ready for spectrum auction only by the second half of 2019 – September  onwards.

DoT has a fair idea of that timeline, also even if the auction takes place around November 2019, the country would not miss the 2020 5G rollout deadline, set by itself. In certain countries, 5G bands are priced around 43 per cent less compared with the 700 Mhz band, which can also be used for 5G services.

Another official said DoT has started looking at proposals internally and also the telcos’ analysis of prices. It’s too early to say if 5G spectrum pricing at all needs revision and be referred back to Trai for a relook, the official added.

All across the world, telecom service providers and countries are gearing up for 5G rollout. Italy is targeting a September auction of spectrum that could be used for 5G. The UK sold bandwidth in April that included some earmarked for these services. The Hong Kong government is even considering giving away airwaves free, said one operator. – Deccan Chronicle

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