Telecom operators are demanding that the Telecom Regulatory Authority of India (Trai) slash the reserve price for the 5G spectrum by more than 90 per cent. According to the Vodafone Idea spokesperson reserve price for 3,300-3,670 Mhz needs to be reassessed. The operators have highlighted that Trai’s past valuation methods need to be relooked given the altered market realities and revenue generation ability.
The TelCos (telecom companies) further argue there should be no upfront payment and a moratorium of 5-6 years. The amount of spectrum can be recovered over 24 years after the moratorium period.
Reliance Jio in its submission said the reserve price for mid-band spectrum should be brought down by around 95% for a pan India 100 Mhz block. Bharti Airtel too said spectrum prices should at best be nominal and thus not be more than 10% of the prices recommended earlier in 2018.
“Its previous approaches like the indexation of past prices, avoided cost method are not relevant due to the changing dynamics of the 5G era. It is no longer enough to augment additional capacity for the same traffic and avoid the cost,” Bharti Airtel said.
Further, the international experiences suggest that incremental revenue from 5G has been negligible, and unable to recover its incremental cost. With reference to payment terms, Bharti Airtel and Vodafone Idea have suggested no upfront payment with a moratorium of six years while Reliance Jio has proposed a 10% upfront payment required to ensure telecom operators’ commitment, followed by a five-year moratorium in payments. While Vodafone has suggested 20 annual instalments post the moratorium period with interest rate at RBI repo rate, Jio has called for 25 instalments after the moratorium period with interest at RBI repo rate.
Bharti Airtel wants 24 instalments after the moratorium with no interest. Regarding the spectrum caps, Airtel has proposed that the 50% cap in the sub-GHz band should be reduced to 35% while the overall cap of 35% should be continued with. Reliance Jio has submitted that in an effectively three-player market, the 35% cap is not suitable for promoting competition as this may lead to quasi-administrative allocation in some prized bands, therefore, it should be 50%.
In 2018, Trai had recommended a reserve price of Rs 492 crore per Mhz for 3,300-3,600 MHz band. The price meant that for a pan India minimum block of 20 Mhz, operators would have to shell out Rs 9,840 crore, which was seen as steep. As telcos need about 100 Mhz to offer pan-India 5G services, this price means that they would need to shell out Rs 49,200 crore.