5G spectrum auctions might have a ‘buy now pay later’ scheme

• The government has refused to make 5G spectrum cheaper on the recommendations of the Telecom Regulatory Authority of India (TRAI).
  
• The government is also looking at options to extend the payment time for the spectrum from 10 years to 16 years.
  
• The government is also working on reducing the upfront price for the auction by 5-10%.
  

The government has refused to make 5G spectrum cheaper ahead of the upcoming auctions. But it is providing a lifeline to telecom companies, making it easier for them to own it, by spreading payments for it, by over 16 years, according to a Business Standard report.

This comes as good news for telecom companies like Reliance Jio, Bharti Airtel and Vodafone Idea, who have raised concerns over the high base price set by the government.

To ease the burden of already debt-laden companies, the government is known to be studying options to lower the upfront payment to 5-10% of the total value of the spectrum they purchase.

This development has come after the Telecom Regulatory Authority of India (TRAI) stuck at its recommended reserve price of ₹492 crore per MHz for the prized 5G spectrum which can provide ultra high-speed Internet connections.

This move, if taken, will be in line with the recommendations of the Digital Communications Commission (DCC) made last year in January. It said spectrum should be paid for in 10-16 years, to solve the sector’s difficulties.

Tough environment

Lowering margins and increased competition have pushed many telcos into the red. Bharti Airtel has a net debt of ₹108,235 crore as on May 2019. Vodafone Idea is in no better position as it has debt to the tune of ₹118,00 crore. Reliance Jio which kickstarted the data price war has shored up its parent company debt. Its current liabilities with a variety of businesses under it from oil to retail went by ₹27,000 crore in a year, leaving it with less headroom for heavy investments.

As expected, the telecom provides have been unhappy with the prices.

“These prices are exorbitant, given that the state of 5G ecosystem is still nascent. So, we would hope that the government brings the prices of spectrum,” said Bharti Airtel MD and CEO.

Vodafone-Idea chief executive Balesh Sharma also termed the prices as exorbitant, while Reliance Jio’s Senior Vice President V L Shankar said “We need large bandwidth of 5G and at attractive prices.”

In 2016, telecom operators had missed the auction of 700 MHz 5G spectrum auctioned last year.