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India’s 5G spectrum auction may see muted bids as operators jostle for airwaves with private networks



Industry sources said India’s telecom giant is likely to bid tacitly in the 5G spectrum auction in July on concerns that the allocation of some airwaves to enterprises for private networks will result in a potential revenue loss of around 40 per cent.

Top players Reliance Jio and rivals Bharti Airtel and Vodafone Idea have failed to lobby New Delhi to stop the allocation, which would let various enterprises including Amazon and Tata Consultancy Services get airwaves without auction.

SP Kochhar, director general of the Cellular Operators Association of India, which represents the three telecom companies, said, “Telecom companies are very upset, there will be an estimated 40 percent potential 5G revenue loss.”

Kochhar said he was relying on demand from the enterprise to justify the billion-dollar investment as price-conscious retail consumers would slow to move.

“It’s a big disappointment.”

Five other telecommunications industry executives told Reuters the rise of private 5G networks has undermined the business case for telcos, which are now likely to bid silently at auctions.

Reliance, Airtel and Vodafone did not respond to emails from Reuters requesting comments.

However, the government has said that allowing private networks, such as those in South Korea and Germany, would encourage the innovation of automation and other technologies in places such as factories or ports, without worrying about bandwidth or latency issues.

Broadband India Forum (BIF), which represents tech firms like Tata Consultancy and Amazon, has said that private 5G networks will accelerate digital transformation.

‘Risk of dilution’

Research group Omdia said this month that the launch of 5G services in the world’s second-largest mobile market after China is a “watershed moment” for the country and the global 5G market.

Omdia in its report said that nearly 50 per cent of India’s enterprises want to start using 5G within 12 months and there is a demand from private network suppliers.

Analysts at IIFL Securities of India flagged “vulnerability risk to 5G-connected telcos from enterprises”.

Telecom companies have already complained of a “very high” base in the prices of 5G spectrum, which is seen as one of the highest in the world.

IIFL said now with private networks expected to spur demand, the telecom giant is likely to bid for only four of the 10 bands on offer for an estimated $9 (about Rs 700) billion.

According to industry group GSMA, the total spectrum cost in India is 32 per cent as a proportion of the annual recurring revenue of telcos, which is the highest in the world.

The bleak outlook comes as Airtel and Vodafone reel from the price war started by Reliance in 2016.

Airtel and Vodafone have reported losses in recent years, also squeezed out of spectrum dues to the government, though recent hikes in mobile data prices have gradually started helping at least the former turn profits. Is.

captive network

The potential loss to telcos is a boon for companies planning to launch private 5G network services. Globally, more than two dozen countries have led the way in such networks.

India has said there will be no entry or license fee for a 10-year license for private networks that can be created by firms with a net worth of more than Rs. 1 billion .

They have to pay the application fee of Rs. 50,000 It is not clear whether there will be any other charges.

The spectrum will be assigned after “demand study” and regulatory clearances.

The government aims to begin the rollout of 5G – which can provide much faster data speeds than 4G – by spring 2023.

A public telecommunications network adapts to the needs of the public, but the changing demands of an enterprise “can only be achieved through a dedicated captive private 5G network”, the BIF stated.

“Private 5G networks offer India a great opportunity to keep pace with the world,” BIF said in a statement in June.