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Indian telcos to have limited participation in 5G spectrum auction despite low reserve prices: Ind-Ra
TT Correspondent |  |  07 Aug 2018

According to India Ratings and Research (Ind-Ra), Indian telecom operators may have limited participation in the 5G spectrum auctions as the telcos’ already high leverage levels and existing capex priorities could constrain their participation despite the low recommended reserve prices.

The ratings and research firm on Tuesday in a note said that the immature ecosystem for 5G does not make a strong business case for the spectrum purchase. Also, an operator’s ability to re-farm existing spectrum holdings to 5G from 2G, 3G and 4G would also determine 5G spectrum’s supply and demand.
When it comes to 5G, Ind-Ra believes that Reliance Jio is ahead of the curve with its all-IP data and 4G LTE network, making it easier for the telco to support 5G. Also, the telco has support from its parent company Reliance Industries Limited for its debt servicing.

In the auction, 7,462MHz of the total spectrum is recommended to be put on the block, which is 3.2 times of the supply offered for the auction in October 2016. This proposed spectrum is more than the total spectrum held by the industry, which will make its off take difficult, Ind-Ra said.

The Telecom Regulatory Authority of India (TRAI) has suggested that the spectrum auction should be postponed to 2019 when the 5G technology is likely to be available for commercial launch. The regulatory body has recommended that the reserve price of 700MHz band be equal to 2x of reserve price of 1800MHz spectrum band which is 42% lower than the price for 700Mhz in the earlier auction.

Furthermore, the offtake of 3300-3600Mhz bands could also be uncertain given the large quantity proposed to be auctioned and other constraints. However, on the brighter side TRAI has not prescribed coverage related rollout obligations for the spectrum bands.

To determine pricing of the spectrum bands, TRAI has relied upon market discovered prices of a comparable spectrum band and applied a technical efficiency factor to arrive at the valuation of the spectrum bands being put to auction for the first time.

For the valuation of 1,800MHz, 800MHz, 900MHz and 2,100Mhz spectrum, TRAI has recommended that the average expected valuation of spectrum band should be the higher of the average expected valuation of that band based on simple mean or the auction determined price of October 2016.

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07 Aug 2018(IST)  
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