The Telecom Regulatory Authority of India (TRAI) has recommended a 35-36 per cent reduction in the base price of 5G spectrum band (3300-3670MHz band) to Rs 3.17 billion on a pan-India basis from the Rs 4.92 billion that TRAI suggested in 2018. As per the press release, TRAI mooted a mega auction plan valued at over Rs 7.5 trillion at the base price across multiple bands for radio waves allocated over 30 years.
Overall, TRAI recommended about a 39 per cent reduction in the reserve price for the sale of spectrum for mobile services, including the latest 5G offering. This move is aimed at matching revenue expectations with the industry’s paying capacity. TRAI suggested a reduction in reserve prices in the 700MHz band, where base prices have been cut by as much as 58 per cent and 45 per cent in the key circles of Mumbai and Delhi, at Rs 4.70 billion and Rs 5.09 billion, respectively, for paired spectrum for a duration of 20 years.
On a 20-year basis, the floor price in the 700 MHz band has been cut by 40 per cent to Rs 39.27 billion per MHz for a pan-India spectrum while the same in 800 MHz has been lowered by 22 per cent to about Rs 36.20 billion per MHz on pan-India basis. With regard to the new 600MHz band, TRAI has set the same base price, which along with 700MHz, could provide contiguous spectrum for Reliance Jio, Bharti Airtel and Vodafone Idea Limited (Vi), subject to the condition that they opt for the bands in the upcoming spectrum auctions.
The government plans to hold the auctions by May-June, 2022 and will have to approve all of TRAI’s recommendations before proceeding with the spectrum sale. With large swathes of spectrum remaining unsold in the last two auctions, TRAI has recommended the government to sell airwaves in all existing bands of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz and new slots of 600 MHz, 3300-3670 MHz and 24.25-28.5 GHz.
Meanwhile, the reserve price of spectrum allocation for 30 years will equal 1.5 times the reserve price of spectrum allocation for 20 years for the respective band, TRAI said.
A block size of 10MHz for the 3300-3600MHz band and 50MHz for the 24.25-28.5GHz band was recommended to offer flexibility to telecom operators. TRAI has also rationalised spectrum caps and removed the overall cap across all bands. It has kept a 40 per cent cap on combined spectrum holdings in the sub-1GHz band space in 1800MHz, 2100MHz, 2300MHz and 2500MHz bands and individual bands of 3300-3670MHz and 24.25- 28.5GHz spectrum bands.
According to the release the regulator has provided the carriers with two distinct options. The first option is that full or partial upfront payment of the bid amount to be made within 10 days of declaration of the final price and in case of a part upfront payment, a moratorium of a proportionate number of years will be offered, with payment of balance amount in equal annual instalments over the remaining period post the moratorium.
The second option includes payment of 30 equal annual instalments of the bid amount can be made, with the first instalment to be paid within 10 days of declaration of the final price. The regulator has recommended that all options be opened for uptake of captive wireless private networks, private networks, including enterprises seeking spectrum on lease from carriers or taking it directly from the government through a licence, which will be governed under an online portal based regime.
Further, enterprise may obtain the spectrum on lease from carriers and establish their own isolated captive wireless, private network. The enterprise may obtain the spectrum directly from the government and establish their own isolated captive wireless, private network. Meanwhile, in the enabling framework created for private networks, the regulator recommended that a private network can be set up through carriers using a network slice or the enterprise asking carriers to establish an independent isolated private network in the enterprise’s premises using the carrier’s spectrum.
TRAI has also recommended that the government earmark spectrum for captive wireless, private networks to be assigned directly. Additionally, TRAI has urged the Department of Telecommunications (DoT) carry out harmonisation of the 800MHz, 900MHz and 1800MHz bands after the auctions so that frequencies assigned to the carriers are contiguous. Further it has also urged the government to plan reframing the 526-582MHz band so that the same can be utilised for IMT deployments.
The release also mentioned the formulation of ‘Telecom Innovation Centres’, in alliance with different academic institutions and ministries, specialised for development of innovative solutions for 5G use cases and applications in different verticals / sectors.
Commenting on the TRAI’s recommendations, Ankit Jain, assistant vice president and sector head, Corporate Ratings, ICRA Limited, said, “TRAI has recommended spectrum auctions with one of the largest quanta of spectrum on offer (more than 100,000 MHz). A lot of new bands have also entered the spectrum auction process viz. 600 MHz, 700 MHz, 3300-3600 MHz and 28 GHz bands, which contribute more than 80 per cent of the total value of spectrum to be put to auctions. The reserve prices have been materially revised downwards by around 35-40 per cent from the last spectrum auction and despite this, the total spectrum on offer at reserve price is valued at around Rs 5 trillion for 20 years. Even at a modest participation in this auction, the debt levels of the industry are likely to elevate further to Rs. 4.8 trillion by March 2023, despite the improvement in the cash flow generation post the tariff hikes as well as the deleveraging initiatives undertaken by the telcos. The government of India had budgeted around Rs. 528 billion as non-tax receipts from the telecom sector for FY’2023, of which it is estimated that around Rs. 260 billion is from upfront payment of auctions proposed in the current fiscal.”
Meanwhile, Ankit Agarwal, MD, Sterlite Technologies, said, “Today, India’s 5G story turns a new page! Every penny saved in the spectrum auction can be used to deliver enhanced customer experience. Initial estimates suggest around 35 per cent reduction in the spectrum pricing. This is a very welcome move and will play a pivotal role in bringing the country closer to its 5G dream. This will enable service providers to spend additional capital expenditure (capex) and launch new-age services and business models. The lower budgetary obligation for spectrum will allow the telecom operators to strengthen their fibre penetration in backhaul infrastructure, bolster the initiatives around building broadband highways, connecting rural areas, and investing towards open radio access network (O-RAN) – all essential prerequisites for 5G and fulfilling the vision of a truly connected country. Also, the introduction of new bands and Telecom Innovation Centres will further boost 5G use cases and applications in various sectors.”