By Sanjay Thapa Jeet
The Indian government is readying to auction 5G licences by 2018. It has already set the ball rolling by asking the Telecom Regulatory Authority of India (TRAI) to suggest the pricing mechanism while the Finance Ministry is eyeing a bigger revenue from the 5G auctions.
A pricey auction
The telecom industry is highly capital intensive and is saddled with a huge debt of Rs 4.9 lakh crore. To add to this, the massive undercutting of data prices with the Jio onslaught has upset the cash-strapped telcos’ applecart. The 5G would also be offered in higher frequencies from 3400 MHz till 3600 MHz. It will also put to auction the unauctioned bandwidth in the 700 MHz range.
Not only are the next generation 5G bandwidth auctions expected to be pricey but telecom companies may feel the heat of mobilising higher resources for funding their purchases. Many have yet to pay their 2013 auction licence fees.
Keeping up with Jio
The Reliance Jio launch has upset the telecom industry leading to sector consolidation by mergers and has led to compression of the fourth quarter earnings of many leading Indian telcos. Jio has led to a massive data tariff war and the last one to enter the ring was BSNL.
Despite its doubtable connectivity issues, BSNL has offered 270 GB at Rs 333 and almost 10 GB per day as opposed to its competitors. This offered package has further dented the operating margins of the telcos. Telecom companies have already been witnessing a sharp fall in their operating margins within the last quarter.
Hopes pinned on auction money
The government has garnered Rs 65 crore at the previous auction in 2016. 700 MHz remained unsold due to exorbitant pricing at Rs 1175 crore per unit. The Finance Ministry has been counting on the auction kitty to shore up its shortfall in revenues as well as meet the fiscal deficit target.
An alternative by the Finance Minister for raising capital through disinvestment of Public Sector Units (PSUs) has also fallen short of expectations. Many a time the offer of a PSU sale has been scuttled by the volatile stock market and salvaged by government-owned financial institutions like LIC Mutual Fund, for the undersubscribed portion. At times, the offer price of the PSU scrip sale has been sabotaged as the scrip is available at a cheaper price in the open market.
Evaluating 5G
Existing telcos are of the opinion that a new bandwidth may not be mandatory as they can tweak the current technology to meet up to the 5G standards. However, the quality of the connectivity has been an issue in the past. Even after the launch of Jio, the subsequent Mbps war has not been without grey areas. With many consumers still complaining of lesser data speed than the promised speed of 50 Mbps, 5G is said to be 1000 times faster than 4G. It will enable machine to machine interconnectivity and is said to lay the path for a direct satellite to satellite connectivity.
Sanjay Thapa Jeet is an alumnus of Cambrian Hall Dehradun and has worked with The Indian Express and India Today.
Featured Image Source: Reliance Jio News