Mega 5G spectrum auction gets Cabinet nod: What lies ahead for stakeholders

The Union Cabinet has approved the auction of airwaves capable of offering fifth-generation or 5G telecom services including ultra high-speed internet, and gave its nod for setting up of captive 5G networks by the big tech firms.

The auction of over 72 GHz of the spectrum will be held by July-end, said an official statement detailing the decision taken by the Union Cabinet headed by Prime Minister Narendra Modi, at its meeting held on June 14.

The spectrum auction will commence on July 26, 2022.

While the 5G spectrum in nine frequency bands will be auctioned to telecom operators like Bharti Airtel and Reliance Jio, the Notice Inviting Applications -- bid-related document issued by DoT -- said big tech firms for the time being will be allowed to take the 5G spectrum for their captive non-public network, on lease from the telecom companies.

“A total of 72097.85 MHz of spectrum with a validity period of 20 years will be put to auction to be held by the end of July, 2022. The auction will be held for spectrum in various bands (600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz), Mid (3300 MHz) and High (26 GHz) frequency bands,” the government said in a press release on Wednesday.

Economic potential of 5G services

Prime Minister Narendra Modi recently called for a rapid rollout of 5G services and asked the government and the industry to work together for the same, as the 5G service is expected to contribute $450 billion to the Indian economy in a decade and a half through economic growth and job creation. He also announced that the country should be prepared for the launch of 6G service by the end of this decade.

Possible pitfalls

The next generation 5G roll out is highly expected by the end of this year, but there are some challenges.

1. The 5G roll out will require crucial infrastructural change in the  communication system.

2. Consumers will be under a financial liability to upgrade their cellular technology for better transition from 4G to 5G.

3. Lack of capital adequacy with telcos such as Bharti Airtel and Vodafone Idea can be considered as a challenge to rapid 5G roll out.

Telecom industry, being a major part of the Indian economy, is expected to contribute 8% to Indian GDP in 2022. While the 5G roll out in India is being considered the beginning of a new era. It is also a step forward to PM Modi’s Digital India dream, as stated by Communications Minister Ashwini Vaishnaw.

"Moving forward with PM @narendramodi ji's vision of a Digital India. Spectrum auction announced today is an integral part of developing #BharatKa5G ecosystem," Vaishnaw said.

Major govt announcements on 5G spectrum

According to DoT, the 5G services will initially be introduced in 13 major cities in India including Ahmedabad, Bengaluru, Chandigarh, Chennai, Delhi, Gandhinagar, Gurugram, Jamnagar, Hyderabad, Pune, Lucknow, Mumbai, and Kolkata. The government has also announced that a total of 72GHz of spectrum will be auctioned across all frequency bands including 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 3300 MHz, and 26 GHz.

What's in it for telcos

The telecom industry is expected to shell out around Rs 1-1.1 trillion on the 5G auction, despite telcos' reservations over high spectrum prices, Icra said on Wednesday but cautioned that sector debt level is likely to rise with upcoming auctions. 

According to Icra, given the relaxed payment terms for the auction, the upfront outgo is likely to be around Rs 10,000 crore for the industry.

It said industry ARPU (Average Revenue Per User) is expected to increase to Rs 170 by the end of FY2023, driven by tariff hikes and consistent up-gradation of subscribers.

The much-awaited 5G spectrum auction will bring significant advancements for the industry and consumers, market watchers said on Wednesday, while some felt that the base price for spectrum remains an issue for bidders, who were expecting much lower rates.

The 5G auction and steps outlined for bidding will open up newer avenues for deeper penetration, access and rich user experience, Peeyush Vaish, Partner and Telecom Sector Leader, Deloitte India, said.

He noted that the government has also announced an auction of the millimetre-wave (mm-wave) band, which will not only help in unlocking the true potential of 5G but will also help strategically manage costs for the operators.

"The roads are now clear for the 5G auctions. This is probably one of the most awaited spectrum auctions, which will bring significant advancements for the industry and the consumers," Vaish said, adding the good part is that spectrum across bands will go under the hammer shortly.

Another aspect which will spur "a good auction" is that operators will have the flexibility to surrender the spectrum after 10 years without any liabilities.