India is set to auction 5G spectrum starting July 26 after its Cabinet, chaired by Prime Minister Narendra Modi, approved the proposal sent by the Department of Telecommunications. The government will put up over 72 GHz of spectrum for auction for a period of 20 years, as per the Notice Inviting Applications, which is the main auction document containing all rules.
Notably, the announcement hasn’t brought good news to Indian telecom operators, with the Cabinet leaving the reserve price of 5G airwaves unchanged besides clearing direct spectrum allocations to corporates and enterprises for setting up captive private 5G networks.
“Enterprises setting up captive non-public networks (CNPNs) may obtain the spectrum directly from DoT and establish their own isolated network,” said the Notice Inviting Applications issued by the telecom department.
The department, in the NIA, said that it would undertake demand studies and thereafter seek recommendations of the telecom regulator for “direct assignment of spectrum to such enterprises”.
The auction will be held for spectrum in various Low (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz), Mid (3300 MHz) and High (26 GHz) frequency bands.
It is expected that telcos will utilize the mid and high band spectrum to roll out 5G technology-based services capable of providing speed and capacities “which would be about ten times higher than what is possible through the current 4G services”, the government said in an official statement.
The spectrum auction will be benefitted from the recently announced reforms, including zero Spectrum Usage Charges (SUC) on the spectrum acquired in the upcoming auction, which will provide significant relief to the service providers in terms of the operating cost of telecom networks. Further, the requirement of submitting a financial bank guarantee equivalent to one annual instalment has also been done away with.
The Cabinet announced various progressive options with regard to the spectrum to be acquired by bidders through the spectrum auction to facilitate ease of doing business.
“For the first time ever, there is no mandatory requirement to make upfront payment by the successful bidders. Payments for spectrum can be made in 20 equal annual instalments to be paid in advance at the beginning of each year. This is expected to significantly ease cash flow requirements and lower the cost of doing business in this sector,” the government said,
It added that the bidders would be given an option to surrender the spectrum after ten years with no future liabilities with respect to balance instalments.
To meet the backhaul demand, the Cabinet has decided to provisionally allot two carriers of 250 MHz each in E-band to Indian telcos. It also decided to double the number of traditional Microwave backhaul carriers in the existing frequency bands of 13, 15, 18 and 21 GHz bands.
“One of the key highlights of the 2022 spectrum auction NIA is abolishing spectrum usage charges (SUC) for this auction. This is a positive move and is in line with TRAI’s recommendation. SUC paid by operators currently varies between 3-5% of Adjusted Gross Revenue (AGR) depending on the year of acquisition and the 0% SUC will be a welcome relief to operators and enable a faster 5G rollout. 5G is a key driver for growth and the start of this auction process is a big move ahead,” Prashant Singhal, EY Global TMT Emerging Markets Leader said in a statement.
Ratings firm ICRA expects Indian telcos to shell out around Rs 1.0-1.1 lakh crore ($12.99 billion-$14.29 billion) in the upcoming 5G auctions. Given the relaxed payment terms, however, the upfront outgo is likely to be around Rs. 10,000 crore ($1.3 billion) for the industry.
Additionally, the firm said the industry needs to shell out Rs. 17,000 crore ($2.21 billion) annually towards spectrum instalments till the moratorium ends.
ICRA expects industry debt levels to increase to around Rs. 5.7 lakh crore ($74 billion) as of March 31, 2023.