Telecom operators likely to get 16 years to pay for 5G spectrum

The Union government is examining the feasibility of allowing telecom operators an easier staggered payment route for the upcoming 5G spectrum auction in view of the financial stress in the sector.

Preliminary discussions suggest the Centre is looking at bringing down the upfront payment amount to as low as 5 to 10 per cent of the value of the spectrum a telco buys at the auction. The Department of Telecommunications (DoT) is considering this payment method after the Telecom Regulatory Authority of India (Trai) stuck to its recommended reserve price of Rs 492 crore per MHz for the 5G band. 

It is learnt that after making the upfront payment, telcos may be allowed to pay the remaining amount over 16 years. “The Digital Communications Commission (DCC) had pointed out the financial stress in the sector and that needs to be addressed,” a source in the know said.

The DCC, comprising officials from the NITI Aayog, Department for Promotion of Industry and Internal Trade, Department of Economic Affairs, Ministry of Electronics and IT, besides the DoT, had asked Trai to review its recommendations on 5G spectrum sale scheduled for later this year.

The deferred payment mode, being considered by the DoT, will be in line with the earlier recommendations of the DCC (January 2018) where the apex decision making body approved the extension of the spectrum payment period to 16 years from 10 years in view of financial difficulties in the sector.

Leading service providers such as Bharti Airtel and Vodafone-Idea have opposed the high reserve price, even threatening to keep out of the auction process. Later, Reliance Jio also expressed concern over the spectrum price.

On May 31, Bharti Airtel MD and CEO (India and South Asia) Gopal Vittal had said, “These prices are exorbitant, given that the state of 5G ecosystem is still nascent. So, we would hope that the government brings down the prices of spectrum…. That is the stage where we would look seriously at 5G.”

On June 4, Vodafone Idea chief executive Balesh Sharma said, “The current 5G spectrum pricing is exorbitant.”

Reliance Jio later joined the industry chorus and the company’s senior vice-president V L Shankar, on June 28, said, “We need large bandwidth of 5G (spectrum) and at attractive prices.”

In August 2018, Trai had recommended a pan-Indian base price of Rs 492 crore per MHz for 5G radiowaves, while lowering the base price by more than 40 per cent of premium 700 MHz frequencies that remained unsold in the 2016 auctions.  Airwaves in the 3,300-3,600 MHz 5G band will be auctioned in the block size of 20 MHz.

Trai suggested a base price of Rs 4,651 crore for paired spectrum in the 800 MHz band covering 19 circles, Rs 1,622 crore per MHz for the 900 MHz band covering seven circles, Rs 3,399 crore per MHz in the 2,100-MHz band covering 21 circles, and Rs 821 crore per MHz in the 2,500 MHz band covering 12 circles. It also suggested Rs 960 crore per MHz for unpaired spectrum in the 2,300 MHz-band on a pan-Indian basis.

The Centre earned Rs 65,789 crore from spectrum auctions in 2016, when it sold bands across 2G, 3G, and 4G.