The Telecom Regulatory Authority of India (TRAI) recently came out with recommendations for the 5G spectrum auctions. The regulatory body recommended a price cut on spectrum bands. But the interesting thing to note here is that the price cut was done keeping in mind a period of 20 years. However, when 30 years are considered, the reserve price recommendations are higher than what the industry would have expected. The industry had asked for a price cut of up to 90% in the reserve price of the airwaves. But the TRAI has recommended something much lower than that. There could be a reason behind this!
Govt Revenue Might Also be in Focus
For the government, spectrum auctions are a serious money maker. Telcos spend thousands of crores on every auction that takes place. A 90% price cut as recommended by the telcos would have meant much lower revenue for the government. The regulator must have it in mind that there would hardly be any bidding war that would inflate the price of the airwaves. The C-band spectrum is already available in enough quantum for each telco to buy enough without having the need to engage in a bidding war. Further, the regulator might have also considered that Vodafone Idea (Vi) wasn’t going to spend much in the upcoming auction because of struggling financials. Thus, a steep lowering in the reserve price of the spectrum would hurt the revenues the government had budgeted from the telecom sector for the current fiscal. Even the analysts believe that the price cut is not enough or not as per the expectations of the industry. Both ICRA and ICICI Securities said that the debt levels of the telecom industry would go up following the 5G spectrum auction. Both Jio and Airtel had engaged in a deleveraging activity to reduce debt from their books. These telcos can afford to pile on more debt. But the same can’t be said for Vodafone Idea (Vi), which is still struggling to raise funds from external investors. The telcos would require plenty of spectrum in the C-band (3300-3670 GHz) that will be available in the auction. This particular frequency band would play a key role in helping telcos roll out 5G networks across India.
