(Representational Image)  |  Photo Credit: BCCL
Indian telecom operators have asked for two major changes related to the 5G spectrum ahead of the auction. The operators have asked to reduce the spectrum prices by 90-95% and have also demanded relaxation in payment terms.
The 5G spectrum auction is expected to happen in H1CY22, while the government aims to start 5G services in 13 cities by the end of 2022.
As per the auction conducted last year, telecom operators are required to pay 25% to 50% of the spectrum cost upfront depending on the spectrum band. The remaining is expected to be paid in equal installments over a 16-year period. However, the payments start after a two-year moratorium, and interest is being charged at a rate equal to MCLR+4%.
What Operators Are Demanding
|Operators||Spectrum Price Cut||Payment Plans|
|Jio||95%||10% Upfront, 5-year moratorium, 25 EMI with 4% interest rate|
|Airtel||90%||No upfront, 6-year moratorium, 24 EMI with no interest|
No upfront, 6-year moratorium, 25 EMI with interest as per RBI repo rate
The demand to cut spectrum prices by 90-95%, appears to be huge, but according to telecom expert Sanjay Kapoor, it is justified given the high capex requirements.
“Even in high ARPU countries, the jury is still out on the 5G profitability. Given that the capex requirement for deploying 5G in India will be huge, the breakeven is even a bigger question mark. From that perspective, industry demand is justified. For the greater good of the consumers, industry & country, the government should accept those demands.”
Sanjay Kapoor, telecom industry expert, and entrepreneur, former CEO of Bharti Airtel India and South Asia, and Chairman of Micromax
Last year, the Government had announced various measures which were expected to aid the start of 5G services in the country. However, it seems that these two demands could now be the deciding factor on when 5G services will start in India.
Reforms Announced Last Year:-
- Non-telecom revenue to be excluded from AGR definition
- No bank guarantees required
- Tenure of spectrum increased to 30 years from current 20 years
- Option to surrender spectrum after 10 years
- No Spectrum Usage Charge (SUC) Vs current levy of 3-5%
- Additional SUC of 0.5% on spectrum sharing removed