5G services might kickoff in October but your mobile bills could rise sooner

• 5G in India is all set to become a reality now that the spectrum auctions are done with.
• However, with telcos buying large capacities of spectrum, price hikes could be imminent, say industry experts.
• Government’s telecom reforms are expected to provide some relief to the common man, too, in the form of lower 5G prices.

Now that the highly anticipated 5G spectrum auctions are done with, analysts say telcos could announce price hikes as they look to offset some of the costs of their respective bids.

Overall, Reliance Jio, Airtel, Vodafone Idea and Adani Data Networks have won a total of 51,236 MHz spectrum worth ₹1,50,173 crore – far higher than the government estimate of ₹1,10,000 crore — and more than twice the amount estimated by analysts.

On the outset, it would seem that telcos drove up the prices of spectrum by competitive and aggressive bidding. However, that is far from reality, as most of the spectrum was sold at reserve prices. Only select circles like UP East witnessed aggressive bidding, with the spectrum there going up from the reserve price of ₹91 crore per MHz to ₹161 crore.

According to reports, there are two reasons behind the 5G spectrum auctions crossing the ₹1.5 lakh crore number – Jio opting to shore up plenty of spectrum in the 700 MHz band, and telcos strengthening their existing legacy spectrum holdings.

“Post the auctions, the debt levels of the industry would increase further to around ₹6 lakh crore as on March 31, 2023, with the addition of the spectrum liabilities,” said Ankit Jain, VP & sector head of ICRA.

4% higher mobile bills or 30% costlier 5G

According to a report by Nomura, telcos have two options to offset the extensive 5G spectrum purchases – increase prices for their existing subscribers, or launch 5G services at a premium.

The Nomura report says a 4% hike in tariffs today would allow telcos to pay for their 5G spectrum purchases.

Alternatively, the report says telcos could launch 5G services at a 30% premium – for instance, a 1.5GB per day 5G plan could cost ₹866 for 84 days, up from the ₹666 plan that Jio currently has.

The fact that a modest tariff hike would cover the telcos’ 5G spectrum bills can be attributed to the Indian government’s telecom reforms in September last year, which brought zero spectrum usage charges in future spectrum auctions and other relief measures to reduce the distress in the telecom industry.

If telcos still make 5G services too costly, the Indian telecom minister said the state-owned BSNL will rollout 5G “very rapidly”.

All that is good, but when will 5G services launch in India?

Indian telecom minister Ashwini Vaishnaw has announced that the 5G spectrum allocation has been fast-tracked, with the process to be finished by August 10 – within 9 days of the conclusion of the auctions.

“We expect that the rollout will happen starting in October, and within a year or so, we should have a good rollout of 5G in the country,” he said at an investor summit yesterday.

Leading telco Reliance Jio could be the fastest to launch 5G services in India, according to a statement from the company.

“We will celebrate Azadi ka Amrit Mahotsav with a pan India 5G rollout. Jio is committed to offering world-class, affordable 5G and 5G-enabled services,” said the newly-appointed chairman of Reliance Jio, Akash Ambani.

This is largely thanks to its massive fiber network across the country, and the fact that it has an all-IP network without any legacy infrastructure. Airtel and Vodafone Idea, on the other hand, have plenty of legacy tech and subscribers to work with, so their rollouts could be slightly slower.

SEE ALSO:

Fewer restaurants and delivery partners are signing up with Zomato

5G spectrum auctions: Big money is in but no bidding war yet

Reliance Jio posts a moderate 5% increase in profits in Q1 FY23, adds 10 million new subscribers