The turmoil of the country’s telecoms industry combined with extortionate spectrum prices means Airtel has no plans to pursue the 5G spectrum
Discussions with the Telecom Regulatory Authority of India (TRAI) surrounding spectrum prices have been going back and forth for months. The industry has consistently complained that India’s spectrum reserve pricing was being set too high, an issue which has plagued the nation’s telcos for the previous decade.
As of last year, only 60% of the spectrum licences available in India have been sold – surely an indication that the pricing structure is failing the industry.
Nonetheless, TRAI has shown significant resistance to the idea of lowering the cost, leading Bharti Airtel to suggest they will not be bidding in the upcoming auction, instead sparing their cash to focus on their 4G offerings.
“We believe the price is too high,” said Bharti Airtel’s chief CEO Gopal Vittal. “So, we will not pick it up at those prices.”
The cost of 100 MHz of 5G spectrum would be around Rs 50,000 crore (around $7 billion) for the 3.5 GHz band, around 30–40% higher than global rates.
The Indian government has stated that it intends to launch 5G in India by 2020, which seems ambitious given the financial position of its operators. An Ericsson report has previously suggested that 5G connections will not be available in India until 2022.
To remedy its strained finances, Airtel is urging more tariff hikes so that average revenue per user can finally be driven to a profitable level in the wake of three years of brutal price wars.
Both Airtel and rival Vodafone Idea have been slammed with enormous AGR fees which are under ongoing review by the Supreme Court. Airtel has managed to pull together the funds necessary to pay their dues, but Vodafone Idea is struggling and could face collapse, leaving just two major players in India’s telecoms ecosystem.
The resulting duopoly is widely believed to be a disaster for the industry, a point that Airtel’s CFO Badal Bagri commented on recently.
“On Vodafone, I think my view is that they will remain and I wish that they thrive,” said Bagri. “India needs a three-player market and it’s a large-enough marketplace to absorb three players. I think it will be good from all perspectives — investment, jobs, and reputation — that Vodafone survives and thrives, and I have no doubt that they will do so.”
With the authoritarian nature of Indian telecoms regulation, the immediate future of the country’s 5G rollout is unclear.
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