Dialling right: On 5G spectrum sale

Government should ensure both the exchequer and the public benefit from spectrum sale

Updated - August 15, 2022 04:44 pm IST

Published - August 05, 2022 12:10 am IST

India’s latest auction of telecommunications spectrum, including of bands ideally suited for offering fifth generation (5G) technology services, drew bids exceeding a record ₹1.5 lakh crore in a clear sign that the industry is on the path to recovery. As expected, Reliance Jio emerged as the top bidder, cornering 48% of the airwaves that were acquired by offering more than ₹88,000 crore in total. Bharti Airtel bid just under half that amount for 39% of the spectrum sold, while the most debt-laden Vodafone Idea came in a distant third by committing close to ₹19,000 crore for about 12% spectrum. And in an interesting development that will need close watching, the deep-pocketed, and aggressively expanding Adani Group made its first foray into the telecom space by successfully bidding for a very small but targeted quantum of spectrum — ostensibly for captive use — in the highly sought after 26 GHz band that is considered ideal for 5G services. While the Government has netted just over a third of the ₹4.3 lakh crore reserve price it had set for the spectrum on offer, the fact that 71% of the airwaves on the block won bids is testament to the improvement in the industry’s health. The Centre’s move last year to ease regulatory norms around payment of dues, including a four-year moratorium on outstanding payments and the redefinition of adjusted gross revenues to prospectively exclude non-telecom earnings, allowed service providers a breather and helped them attract investor interest as also spread liabilities over a staggered period.

Separately, industrywide increases in tariffs also helped lift average revenue per user at the telecom service providers, boosting margins. The Government’s policy decision to return bank guarantees to telcos must have helped improve their eligibility for debt – crucial for capital expenditure. And with spectrum usage charges also binned, the enhanced flexibility likely allowed enthusiastic participation from all three private players, a far cry from when the very survival of Vodafone Idea was in doubt. However, the auction also offers crucial lessons. The high reserve price likely dampened enthusiasm for certain spectrum bands. While the 3.3 GHz and 26 GHz were snapped up at the reserve price in several service areas, the 600 MHz was left untouched, and 60% of the 700 MHz spectrum remained unsold. The latter is ideal for rural connectivity as well as signal penetration inside buildings in urban areas. If spectrum is seen as a precious national resource, the Government would do well to not let it lie unused and instead price it in an optimal manner so as to ensure that both the exchequer and the public at large, including in remote rural corners, benefit.

To read this editorial in Tamil, click here.

To read this editorial in Hindi, click here.

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