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Telcos seek 5-6 year moratorium on spectrum payments

Bharti Airtel, Reliance Jio, and Vodafone Idea have sought a 5-6 year interest-free payment gap or moratorium on the spectrum bought in auctions in 2025 and beyond. Spectrum is leased to operators for a 20-year period; the operators want to pay for only 14-15 years in equal instalments.

The operators have communicated to the Telecom Regulatory Authority of India (TRAI) that such a moratorium is needed on spectrum bought-in auctions from next year because they have incurred huge CapEx in rolling out 5G services, which they are yet to monetize. Further, they need to keep on investing in their networks.

“Any new network takes a time period of at least 4-5 years to monetise…Recovering the payment for spectrum in 14 installments spread over the period of spectrum can meet the objective of securing revenue for the exchequer while also alleviating the financial burden on telecom service providers (TSP),” Airtel said in its submission to TRAI in response to consultation paper on auction of spectrum in 37-37.5 GHz, 37.5-40 GHz, and 42.5-43.5 GHz bands.

The newly identified bands, having a quantum of 4,000 MHz, are expected to be put up for auctions next year.

The operators have also urged for a new payment method in addition to the two existing payment terms for spectrum bought in auctions.

Currently, one of the options for payment is – an upfront payment equal to the spectrum installments of a minimum of two years, with the balance payable in equal installments with applicable interest, within the 20-year spectrum holding period.

The other option is payment of 20 equal annual instalments of the bid amount, with first instalment becoming payable within 10 calendar days from the issuance of demand note by the department of telecommunications (DoT).

“The deferred payment for auction discovered spectrum price, should be spread over the remaining 15 years by way of annual payments. These annual payments should be charged with the reasonable interest rates of 6.5% as specified by RBI Repo rate, in place of current prohibitive interest rates,” Jio told TRAI.

The company said the upfront payment should be kept only at 10% of the bid amount and thereafter minimum 5-year moratorium without any interest cost should be provided.

“keeping in mind the financial stress faced by the industry, the payment terms should be such that it supports both investments as well as network deployment, rather than revenue collection,” Vodafone Idea said.

In the 5G spectrum auctions in 2022, the operators purchased spectrum worth Rs 1.5 trillion. Jio and Airtel have also witnessed an increase in yearly capex to about Rs 30,000-60,000 crore owing to 5G rollout.

Besides the easy spectrum terms, the operators have also sought reduction in reserve price of spectrum for the newly identified spectrum bands.

“The current policy of keeping the reserve price at 70% of the valuation is not optimum but too high and becomes an entry barrier and hinders competition. Instead, we recommend that reducing the reserve price to 50% of the spectrum valuation would be optimum,” Jio said.

Echoing Jio’s views, Airtel said, “there is a need to re-look at the approach for the valuation of spectrum such that it is able to balance the long term public good, continuous impact on the national economy and its growth due to investment in telecom infra with the one-time revenue opportunity of spectrum sale”.

On the cap on quantity of spectrum each player can hold, while Jio suggests that the government should do away with any such requirement, Airtel and Vodafone Idea have recommended a 35-40% cap on spectrum holding for the three range of bands to avoid monopoly and maintain a level-playing field. Financial Express

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