Telcos bristle at prospect of Adani poaching their 5G enterprise business

Telecom experts say that that Adani move is an attractive proposition, and according to their estimates, they will have to fork out a nominal Rs 2800 cr for 20 years for pan-India millimetre band

The decision by Gautam Adani to participate in the spectrum auction to create the group’s own private networks to support its businesses has provoked a reaction from telcos who say it will eventually throw him in a headlong competition with them as they believe that 40 per cent of their 5G business revenues will come from enterprises.

Analysts say that Adani  will also offer private network solutions to other enterprises to expand the business.

Telcos also fear that, despite categorically stating that it has no intention of getting in the consumer mobility space, the Adani group’s long-term strategy would be to enter this space through the acquisition of a telco or through taking a strategic position in one of them.

Telecom experts say that the Adani move is an attractive proposition, and according to their estimates, the group will have to fork out a nominal Rs 2,800 crore for 20 years for a pan-India millimetre band (24250-27500 MHz) spectrum to power the private network with 5G.

More importantly, the group can pay this amount in 20 equal installments, easing their overall annual pay outs, which will also include an interest component that they have to pay the government.  

Experts estimate that Adani will require at most 400 MHz of spectrum in the millimetre band across the country to power captive networks in limited locations in circles. It does not require more as the company is not serving mobile consumers but only enterprises.

The band is crucial to offering very high speeds to power machine-to-machine functions and it also has low latency for precision work and high automation.

True, it has a limited coverage area but it is enough to run a vibrant private captive network. With a nominal pan-India base price for this spectrum pegged at Rs 350 crore for a block of 50 MHz (the minimum you need to buy), this translates into Rs 2800 crore for 400 MHz. The Adani group has a choice whether to go in for pan-India spectrum or only in circles where its own captive infrastructure is concentrated, such as in Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Rajasthan.

It could also pick up around 10 MHz of spectrum (the minimum block you can buy) in the more expensive 3.5 GHz band ( Rs 317 crore per MHz for a pan-India spectrum), especially for projects like ports or airports, where large coverage is required.

The bill here is also affordable, at Rs 3,170 crore for 20 years, with similar long payment terms. Alternatively, the group’s companies could tie up with telcos to lease out spectrum from them, which is permitted. Telcos say that if setting up private networks was the sole intention, then it would have been cheaper for Adani to go through a different route.  The cabinet has cleared the setting up of captive private networks for enterprises and will give them spectrum directly, which will be cheaper as it will be given at an administrative price rather than through auctions.

They point to the example of Tata Communications which decided not to go for auction but wait for the government to give spectrum directly to enterprises to set up their captive private networks. Others, though, say that for a business house which straddles so many sectors across the nation —ports, power stations, utilities, airports, aircraft services, data centres, industrial parks and manufacturing facilities — the Adani group has a large captive  base to build its own private network.

It makes even more sense given that the pan-India price it has to pay for auctioned spectrum is reasonable and the fact that there is enough spectrum in the millimetre band. Equally, they argue, it does not make any sense to wait for one or two years before the government’s decision to allow enterprises to run captive private networks gets off the ground.

The Department of Telecommunications still has to do a demand and supply assessment after which TRAI has to fix the price of spectrum. Also, the decision obviates the need for the Adani group to depend too much on telcos to build and maintain networks for them when many of them are bitter rivals in similar business segments.

Telcos are pushing for severe restrictions to be placed on such captive private networks. They want usage restricted to machine-to-machine operations and automation.

They also want them to be denied connectivity to a switched public telephone network, internet cloud platforms, other private networks or to multiple offices and buildings. Moreover, no intermediary should maintain the network.

But with the Adani move to participate in the spectrum, none of these restrictions can be imposed on its private networks (even assuming the government was game) as, just like other telcos, it will buy spectrum in an auction and also take a UASL licence, as they have too.

The 5G Tussle

• Experts estimate that Adani will require at most 400 MHz of spectrum in the millimetre band across the country to power captive networks in limited locations in circles

• Telcos say that if setting up private networks was the sole intention, then it would have been cheaper for Adani to go through a different route

• The Adani group has a choice whether to go for pan-Indian spectrum or only in circles where its own captive infrastructure is concentrated

• The group could also pick up around 10 MHz of spectrum in the expensive 3.5 GHz band, especially for projects like ports or airports, where large coverage is required

• Telcos are pushing for severe restrictions to be placed on such captive private networks