Getting on spectrum auctions without delay should be the way forward

5G spectrum auctions must take place as early as possible for an early launch of data and speed-centric mobile services in India. The Telecom Regulatory Authority of India (Trai) recommendations on 5G spectrum have factored in most issues, especially the pricing for every one of the eleven bands. The telecom industry as a whole might not be on the same page with the government on the timing of auctions for the high frequency airwaves to enable quick roll out of services ahead of 2020 deadline set by telecom minister Manoj Sinha. Having gone through consolidation, mergers and acquisitions, all the four major players have a clear understanding on the airwaves in their armoury and the required quantities to effectively launch 5G services pan-India with seamless linkages internationally.

Trai’s move to slash the base price for the premium 700 Mhz band airwaves by 43 per cent at Rs 6,568 crore as against Rs 11,484 crore per Mhz quoted in 2016 should have gone well with industry leaders. The huge debt build up with the telecom services industry, barring Reliance Jio, seems to have triggered this huge climb down in base pricing formula mooted by Trai. Top players like Bharti Airtel and Vodafone-Idea will find it extremely difficult to bid aggressively given the restructuring, mergers and consolidation, and huge debt of over Rs 200,000 crore between the two of them. On the other hand, Reliance Jio is more comfortably placed in terms of positioning with regard to debt, tariff and bidding for airwaves in the next round.

Even if all the airwaves put across frequencies were to be sold at Trai recommended base price, Rs 5.06 lakh crore would be revenue accrued to government in phases. The government should not look at spectrum sale as a mere revenue mop-up exercise to bridge its fiscal deficit and keep its macro-economic parameters healthy. Instead, 5G services with huge consumption demand in banking, insurance, pension, stock markets, agriculture, space and nuclear power programme, must be considered for multiplier effect in economic expansion.

In sync with global practices, five-year lock-in for spectrum without deadlines for rollout of 5G services is a good idea. Hoarding spectrum should be made a punishable offence. Setting a cap of 100 Mhz spectrum in each band of 5G services and sale of 20 Mhz spectrum in bundles is in sync with international practices. Drawing lessons from countries where 5G spectrum auction has been completed will make the telecom services industry competitive. For instance, South Korea’s 5G auction among the three top telecom majors was completed last month with least fuss. Japan, US and China are among 56 countries that have conducted trials on 5G technologies. And, 113 operators in these countries would roll out high-speed networks with even virtual applications.

Though Trai has recommended a rational base price for 5G auctions, telecom industry has raked up old issues like lowering SUC, licence fees and other levies to make available funds for early roll out of new technologies.

Industry cartels that have till now hoarded spectrum after being allotted, some of it back in 2002, may get into operation to frustrate the 5G auctions without any consideration for consumers who were fleeced till recently. One big issue could be finding debt funds from banks to support the bids by top industry players in 5G auctions. Given that all three top players are part of large conglomerates, one could expect huge leveraging of balance sheets of companies. One cannot rule out the possibility of companies getting out of non-core assets and businesses to minimise interest liabilities and still corner as much spectrum as possible. Whatever may be the case, getting on spectrum auctions without delay should be the way forward.