Spectrum sale: Limited airwaves, huge investments discourage new entrants, say analysts – ETTelecom

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Kolkata: An estimated initial requirement of $16 billion (Rs 1.36 lakh crore) for 5G airwaves and network rollouts, coupled with limited spectrum availability in the vital sub-GHz, 1800 MHz, 3.3 GHz and 2300 MHz bands, were significant deterrents that possibly led to no new bidder applying to participate in the upcoming spectrum auction, say analysts.

Availability of only 50 MHz of 5G spectrum in the 3.3 GHz band in 12 major markets and 20 MHz in another five in the auction reduced the business case for new entrants to roll out quality 5G networks and compete effectively with Reliance Jio and Bharti Airtel that have already concluded countrywide 5G deployments, they said.

A new entrant would ideally need 100 MHz in each of the 22 circles for an effective nationwide 5G rollout, according to analysts.

Earlier this week, only Reliance Jio, Bharti Airtel and Vodafone Idea put in applications with the Department of Telecommunications (DoT) to participate in the 5G airwaves sale that starts June 6.

“That no new company is participating in the upcoming auction comes as no surprise, given the massive investments entailed in both airwaves and pan-India network rollouts, and the fact that it will be a huge business challenge for any new 5G operator to generate meaningful revenues/margins in a low-tariff market with two established incumbents, and where 5G is still being offered at 4G rates,” said Mahesh Uppal, director, Com First India, a telecoms consultancy firm specialising in spectrum regulatory matters.

ICICI Securities estimates the upfront investment for a new entrant deploying greenfield 5G services in India to be around Rs 1,35,800 crore, of which, the total spectrum investment alone would be at least Rs 64,500 crore (based on the reserve prices fixed for the auction) for buying 5MHz each in the 800MHz and 1800MHz bands, and 100MHz in the 3300MHz band nationally.

A new 5G entrant would need to shell out another Rs 71,300 crore in a pan-India 5G network deployment, which would include setting up sites, transport infrastructure (like backhaul, including fibre and microwave) and core network elements.

“We have strong reasons to believe that India may not have any new 5G entrant(s) in the foreseeable future as the start-up investment is too high. There is also the lack of clean coverage/capacity spectrum and also since a new player would have little space for differentiation and be forced to fight on price alone,” ICICI Securities said in a note seen by ET.

According to analysts, latest data collated by the telecom department show the spectrum supply is insufficient in the upcoming sale to support any new 5G entrants, as there wouldn’t be requisite airwaves to carve out contiguous 5MHz blocks in the 800/900 MHz bands in key markets like Gujarat, Haryana and the Northeast.

Spectrum supply is similarly weak in the critical 1800 MHz band in circles such as Maharashtra, Gujarat, Karnataka, Tamil Nadu, UP-East and MP. Supply challenges are even bigger for capacity spectrum across 4G and 5G technologies, given that airwaves in the vital 2300 MHz band are available only in six out of the 22 circles along with limited availability in the 3.3 GHz band in most circles.

“With only 50MHz availability in the 3.3 GHz band in major circles, a new telco entrant would end up offering a weak 5G service vs peers (Jio and Airtel), seriously undermining its competitiveness and ability to monetise the significant 5G-related capex spends,” Uppal of Com First India said.

  • Published On May 10, 2024 at 03:14 PM IST

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