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India gets ready for 5G but high spectrum pricing still a challenge for telcos

On April 11, TRAI (Telecom Regulatory Authority of India) submitted its recommendations to the Department of Telecom (DoT), suggesting sharp reductions in the base pricing for the 5G spectrum auction. It recommended a 40 percent cut in the 700 MhZ band and a 36 percent cut in the 3300–3600 MhZ band. In all, the reserve price across various bands works out to be nearly 39 percent lower than that suggested back in 2018.

While this is a good move by the TRAI, the industry was hoping for a much larger cut. The three leading telecom service providers (TSPs) (i.e., Airtel, Jio, and Vodafone Idea) had all requested that the base price be cut by 90 percent–95 percent from 2018 recommendations, along with much flexible payment terms.

As the India telecom industry debt level continues to be high, and 5G auction will likely increase the debt level further, it is highly likely that the proposed price cut may not be enough for TSPs to aggressively participate in upcoming 5G auctions to be held later this year.

While DoT has shown an intent to help Telcos with their debt by announcing a slew of reforms in late 2021 and returning their bank guarantees, that is still not enough to encourage active participation from them.

It is important that stakeholders in 5G auction move beyond thinking of 5G auction as a revenue-mopping exercise. The present government has shown great ambitions in making India a digitally native and digitally connected society.

The pandemic has also highlighted the importance of mobile data and how it is an essential and critical element in keeping the country connected in a lockdown situation.

High-speed 5G wireless network has the potential to accelerate the economic and social recovery from the pandemic. According to 5G High Level Forum, constituted by DoT, the cumulative economic impact of 5G on India can reach one trillion USD by 2035.

With 5G, telecom players can move beyond B2C marketplace and start capturing and monetizing B2B marketplace as well.

5G can benefit automotive, manufacturing, healthcare, and banking in a big way. India being primarily an agricultural country, can see the next chapter of agricultural revolution, with smart farming and agriculture enabled by 5G networks.

DoT has already setup a program called 5G Vertical Engagement and Partnership Program (VEPP) in collaboration with other ministries and industry to identify 5G use cases across various verticals and facilitate pilot testing for the same.

Given that 5G will require use of street furniture like streetlights, electric poles, and other utility poles, which can house wireless equipment for small-cell deployment, it is important that the fee for street furniture remains reasonable and the right-of-way (RoW) guidelines are clearly defined to ensure due cooperation from state governments and local authorities, including resident welfare associations (RWAs).

For 5G to become a reality in India, the availability of adequate spectrum at affordable financial terms is fundamental to the delivery of pan-India rollout of 5G-based services. Without that, Telcos may be selective in purchasing spectrum and may pick up certain high-speed bands in select circles only, or it could also mean further delays to an already delayed 5G spectrum auction.

Telecom services need to be seen as enablers of socio-economic growth, and year 2022 can start the growth journey with the launch of high-speed 5G wireless services.

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