There may be a reduction in the reserve price of 5G spectrum in relief to telecom companies

In 2018, the Telecom Regulatory Authority of India (TRAI) recommended a base price of 5G spectrum for pan-India airwaves in the 3.3-3.6GHz band at $7 billion.

BofA said Bharti Airtel and Reliance Jio can bid for pan-India 5G spectrum and Vodafone Idea can selectively bid. Analysts at brokerage CLSA said in a separate note on January 6, “The cost of 5G spectrum in the 3.3-3.6GHz band for 100MHz could be as low as $7 billion, in addition to extending the license period to 30 years from existing spectrum.” can be extended up to 20 years.

Analysts said that while the $11 billion 4G spectrum purchase in 2021 was due to renewal obligations of operators, the success of the 800 MHz, 5G auction for Reliance Jio would depend on the price of the airwaves.

As India is a mobile-first country, lower 5G prices will boost the internal rate of return and increase opportunities for spectrum purchases as well as the ongoing sector reforms and strong growth, he said.

Telecom service providers have sought to rationalize prices for 5G airwaves, which they feel are exorbitant. The telecom regulator had in November started the consultation process to fix the reserve price for airwaves in the 5G band.

The government aims to hold the auction by March, but it is likely to be delayed as it will take time to complete the consultations. Analysts at CLSA said that in 2021, 63% of spectrum in auctions was unsold and, historically, the government has cut prices by 30-40% if there was no demand in the previous auctions.

In an interview last month, Communications Minister Ashwini Vaishnav said the government was aware of the issues facing the industry, mainly high spectrum prices, and may consider providing relief in the form of telecom services, including 5G, Rather, it would be a source of ‘public good’. Compared to revenue maximization tools.

“It (telecom) is not just a revenue-raising item (device) but certainly an element of public good in the telecom sector. In fact, some countries have taken the very extreme step of revoking the license and making it zero-cost. During COVID, everyone including TRAI and industry realizes that it is telecom which is supporting everything,” he had said.

The brokerage said the three carriers, Bharti Airtel, Vodafone Idea, and Reliance Jio, are set to report improvement in revenue in the December quarter, led by an increase in average revenue per user (ARPU), including tariff hikes. full effect is expected. in the March quarter.

“We expect Jio, Airtel and Vodafone Idea to report around 6%, 4% and 6% on-quarter Arpu. 149, 163, and 116, respectively,” said analysts at ICICI Direct Securities.

India’s largest telecom service provider Reliance Jio’s revenue expected to grow by 3.5% sequentially 19,387 crore, while Bharti Airtel’s Bharat Wireless revenue is expected to grow 6% 16,111 crores, and Vodafone Idea’s revenue is expected to be approx. 9,835 crore, an increase of 4.6%.

Aided by tariff hike, Airtel and Jio expected to report profits 1,240 crore and 3,675 crore respectively, while Vodafone Idea is expected to make a loss of 6,993 crores.