Telecommunications companies are asking for a 90-95% reduction in the base price of 5G spectrum.
Telecommunications companies have requested that the reserve price of 5G spectrum be reduced by more than 90% for future auctions, with no upfront payment and with a 5-year embargo. After the moratorium period, the amount of spectrum can be recovered over a 24-year period, according to reports.
For the pan-Indian spectrum in the median band 3,300-3,670, the regulator had previously recommended a price of Rs 492 crore per MHz. However, all of the major telecom companies have argued that this figure is far too expensive, implying that 5G services will not be viable.
Subsequent reports pointed out that, according to Vodafone Idea’s remarks to the Telecom Regulatory Authority of India (TRAI), the reserve price for the 3 300-3 670 MHz band should be reduced by almost 90% of the base. Previous assessment, when a reserve price of Rs 492 crore / Mhz for pan-Indian spectrum was recommended. On a per MHz basis, the price for the mmWave band (24.25 GHz to 28.5 GHz) should not exceed 1% of the price for 3300-3 670 MHz.
According to Reliance Jio’s bid, the reserve price for mid-band spectrum should be reduced by around 95% for a 100 MHz pan-Indian block, the reserve price for mmWave bands should be kept at 1 / 100th of the middle band, and the reserve price for spectrum in the V and E bands should be kept at 50% mmWave, taking into account India’s low average income per user or ARPU, purchasing power and international references.
The other big name in telecommunications, Bharti Airtel, said spectrum prices are expected to be modest at best and not likely to exceed 10% of prices quoted earlier in 2018.
Telecom operators noted that TRAI’s valuation methodology and assumptions need to be re-examined given changing market realities, including the health of the industry and the ability to generate revenue.
Bharti Airtel noted: “Its previous approaches like indexing past prices, the avoided costs method are irrelevant due to the changing dynamics of the 5G era. It is no longer enough to increase additional capacity for the same traffic and avoid costs. “
Furthermore, global experience suggests that the additional revenues from 5G have been insignificant and that it has not been able to recoup its additional costs.
In terms of payment terms, Bharti Airtel and Vodafone Idea offered no upfront payment with a six-year moratorium, while Reliance Jio offered a 10% upfront payment to secure telecom operators’ commitment, followed by ‘a five-year payment moratorium.
While Vodafone has offered 20 annual payments with interest at the RBI repo rate – a rate at which the central bank lends money to commercial banks when there is a lack of funds and used by monetary authorities to control the inflation – after the moratorium period, Jio offered 25 payments with interest at the RBI repo rate after the moratorium period.
Also, in the case of Bharti Airtel, after the moratorium, the company wants 24 interest-free installments. In terms of spectrum caps, Airtel requested that the 50 percent cap for the sub-GHz band be reduced to 35 percent, while the total cap of 35 percent should be maintained.
Further, according to Reliance Jio, the 35 percent cap is not adequate to promote competition in a predominantly three-player market, as it can lead to quasi-administrative allocation in some coveted bands; thus, the company estimates that it should be 50 percent.