5G

Indian telcos prepare for 5G spectrum auction this year

The Indian government announced recently that the much-delayed and much-anticipated 5G spectrum auction would finally be held later this year. This effectively means that some 5G services will be available in the country by the end of this year or early 2023. 

On sale would be spectrum in 700 MHz, 800 MHz, 900 MHz, 1800 MHZ, 2100 MHz, 2300 MHz, 2500 MHz and 3300—3600 MHz frequency bands.

Even so, the country started moving toward 5G way back in 2018 when the government formed a high-level committee, which said that 5G will have a cumulative impact of $1 trillion by 2035. Further, it allocated funds to premier technology institutions, the Indian Institute of Technology and the Indian Institute of Science, to set up 5G testbeds.

RELATED: India’s auction of 3.3-3.6 GHz spectrum will propel 5G

Last year, the government took a crucial step to hand over the 5G spectrum to the service providers to conduct 5G trials. This was the first time mobile network operators got spectrum to conduct tests in the country. While initially, the spectrum was given for six months, this was later extended to one year. 

5G Trials 

The Indian telcos are busy conducting 5G trials. Airtel conducted India's 5G trial in the first 700 MHz spectrum. It also announced the completion of the cloud gaming trial and rural 5G test recently. On the other hand, Jio has recently tested connected drones on its indigenously developed 5G solution. The service provider has successfully trialed the integration of energy utilities through sensors with its homegrown 5G SA network. Both Airtel and Jio have formed alliances with enterprises to conduct business vertical specific trials.

RELATED: India delays 5G spectrum auction, extends 5G trials

Vodafone Idea, India's third-largest service provider, has also conducted 5G trials in several domains, including smart cities, healthcare, education, agriculture and cloud gaming, among others.

With several of the 5G tests focusing on the enterprise segment, it is likely that initially, 5G use cases in India will be high-end use cases around businesses, cloud gaming and immersive education. Further, going by the way 4G services grew in India, one can say that it will be at least two to three years before 5G services will be available in all parts of the country. The telcos are likely to focus on metros and category A circles (service areas).   

Money, money

One of the most contentious issues with this spectrum auction is the high reserve price. All the service providers have raised concern about the high rates, with Airtel even saying that it will not participate in the auction at the current reserve price.
  
In 2018 the Telecom Regulatory Authority of India (TRAI) had recommended a reserve price of INR 4.92 billion (around $66.5 million) per megahertz for the 3.3-3.6 GHz band.

Currently, TRAI has come out with a consultation paper and one of the points on which it seeks industry input is the reserve price. 

"Every failed auction results in a missed opportunity for the economy and the sector. Given the fact that in 2016 only 41% and in 2021, only 37.1% of the spectrum was sold, the majority of that at the reserve price itself, we suggest that the Reserve Price should be kept low and fixed at 50% of the valuation of the spectrum to enable competitive bidding and market-driven price discovery," says the response of Cellular Operators Association of India (COAI) to the consultation paper on Auction of Spectrum in frequency bands identified for IMT/5G.

The government had earlier tried to sell the coveted 700 MHz spectrum in the previous auction, but it remained unsold because of the high base price.

Indian telcos are likely to spend INR 1000 billion ($13.36 billion) in the 5G spectrum auction, as per CRISIL Ratings if Jio and Airtel bid for 100 MHz spectrum in all metros and Category A circles (service area) at the current reserve price for the 3300 MHz-3600 MHz band. 

There is a strong likelihood that the reserve rates will be brought down significantly. Even so, the telcos are already consolidating funds for 5G. Recent funding of $1 billion by Google in Airtel will help the company in 5G spectrum. Further, Jio is already flush with funds. At the same time, the bidding for 5G spectrum is unlikely to be very aggressive because there is enough spectrum for all three private telcos, and the reserve price is already high.