5G auctions: Indian telecom companies united on cheaper pricing

With the Telecom Regulatory Authority of India (TRAI) poised to come out with its recommendation on 5G spectrum in a few days, stakeholders are divided on numerous issues except the one which matters the most: pricing.

If the mobile operators — Reliance Jio, Airtel and Vodafone Idea — succeed in making the regulator accept their demands, they will be paying close to global benchmarks of 5G spectrum prices, making the rolling out of the 5G network much cheaper.

If their demands on what the base price should be is accepted, the telcos have to spend only between Rs 2460-Rs 4920 crore for 100 Mhz of pan-India, mid-band spectrum and that too in instalments across 30 long years during which, for 5-6 years, they will enjoy a moratorium. And, at least one telco has also demanded that no interest should be required to be paid on the instalments.

The reason is that the telcos jointly have asked for a gigantic reduction of 90-95 of the base price for the mid-band (3300 MHz to 3670 MhZ) 5G spectrum of what the regulator had recommended in 2018.

What’s more, operators have pegged the base price of the 5G millimetre band spectrum (whose base price is being fixed for the first time) to one hundredth of the mid-band price.

The key is whether the regulator will play ball. TRAI faces a challenging task in executing a sharp reduction on its own price recommendations of August 2018 which came under severe attack from the stakeholders. The final decision, though, will be taken by the cabinet which has the power to reduce the base price recommended by TRAI.

Although the slashing of the base price might seem a steal, it is in line with global auctions of 5G. For instance, in the auction concluded in the UK last year, the price for one Mhz of 5G spectrum was Rs 42.84 crore which is in sync with what some of the Indian telcos have also demanded. In Australia it is only Rs 35 crore. In Spain it is even lower at Rs 14 crore and in Austria, it is a mere Rs 7 crore.   

In 2018, TRAI had recommended a base price of Rs 492 crore for pan-India per Mhz of the spectrum (the quantity available was lower, between 3300-3600 Mhz, while now it is 3300-3670 Mhz) which was pegged at  30 per cent of the reserve price of 1800.

The amount of spectrum each player could buy was capped at 100 MHz (the minimum size of the block was 20 MHz). Based on this base price, a mobile operator going for 100 Mhz had to spend a stiff Rs 49,200 crore for pan-India spectrum.

But there are other areas where Airtel and Reliance Jio have opposing views. One is the quantum of spectrum which is to come for auction. Reliance Jio wants the entire spectrum to come up for auction in the mid-band and wants each player to be capped at 100 Mhz. It has said the minimum bandwidth that a telco can buy should be 50 MHz. 

Reliance Jio estimates that 5G service providers will require 200 MhZ each in the long term so the entire spectrum from 3300 MHz to 4200 MHz should be assigned to telcos. But Airtel has a different strategy. It wants only contiguous, interference-free spectrum to be auctioned in the mid-band as there are existing operations by the defence forces and the navy which will take time to move.

According to Airtel’s calculations, the total clean spectrum available in the mid-band for auction now is 240 MHz and therefore the three players can be given up to 80 Mhz each in this auction.

Analysts point out that BSNL also has to be considered so the average available will actually be 60 MHz.

Reliance believes it’s not possible to provide standalone 5G with such limited spectrum.  

Even in the millimetre band of 24.25 Ghz to 28.5 GHz, Airtel wants the band between 28.5 Ghz to 29.5 Ghz to be kept for satellite broadband operators and offered at an administrative price (Airtel’s Mittal also runs One Web).

Reliance Jio has demanded that the band should also be added in the 5G auction for mixed use by telcos and satellite operators. It also wants TRAI to give telcos permission to allow them to sublease the band for satellite operators for their gateway operations. Reliance is looking at a cap of 1GHz per telco in this band.   

Airtel, however, says that what is available which is clean in the millimetre band and without interference (from weather earth stations) is of around 1.25 Ghz and can provide three operators with 400 Mhz of spectrum each, far lower than what Reliance Jio is pushing for. It will be even lower if BSNL is also earmarked spectrum.   

Reliance Jio and Airtel also differ on the payment method.  Airtel wants no upfront payment for spectrum bought, no interest on spectrum instalments, a moratorium of six years, and the balance to be paid in 24 years. Reliance Jio is willing to pay 10 per cent upfront followed by a 5-year moratorium, with the remaining part of the payment spread over 25 years. But it is willing to pay an interest at the RBI repo rate of 4 per cent.

On the overall spectrum holding cap across the network, Reliance Jio would like it pushed up from 35 per cent currently to 50 per cent as it will have to buy more spectrum for 5G.  Airtel, on the other hand, wants the existing cap to continue. On E-band spectrum which is expected to replace microwave for the backhaul of 5G, Reliance Jio is pushing for the spectrum to be auctioned independently and, like 5G, to be based on a minimum base price. Airtel wants the spectrum to be bundled with 5G spectrum and linked to the amount of spectrum that is bought — the higher the amount, the more E-spectrum is bundled.

However, the Broadband India Forum wants this band to be available for wifi services at an administered price.