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This is going to be the biggest ever sale of spectrum, with the government putting up a staggering 72 gigahertz or 72,000 megahertz of mobile airways on sale, the largest such quantity being sold in one go.
India is gearing up its 5G spectrum auction later this month and it is going to be the biggest ever sale of spectrum, with the government putting up a staggering 72 gigahertz or 72,000 megahertz of mobile airways on sale.
For reference, last year in the March 2021 auctions, the government had put up just 2,250 megahertz of spectrum, which is one of the reasons why analysts do not expect aggressive bidding this time around for the 5G spectrum. Also, bands like 600 megahertz, 5G airwaves like 3,000 megahertz and 26 gigahertz are being auctioned for the first time.
Also, there are many sweeteners that the government has put in place. The biggest one is that the spectrum which will be acquired in 2021 auctions will carry zero spectrum usage charge. A spectrum usage charge (SUC) is paid on the adjusted gross revenues by telcos annually and is an added cost for telcos.
For instance, in a spectrum which was acquired in the previous auctions, the SUC was fixed between 3 percent and 5 percent. This time, it will be zero, and this will provide a very large profit and loss (P&L) savings for the incumbents.
Second, there is no upfront payment mandatory. The Department of Telecom (DoT) has said that payments can be made in 20 equal instalments, there is no upfront payment. So this can ease the burden for telcos like Vodafone Idea.
Also, the interest rate for the net present value (NPV) calculation of spectrum payment has been fixed at 7.2 percent. This is the lowest interest rate versus all the prior auctions and analysts say it looks attractive especially given we are in a rising interest rate environment.
There are other sweeteners as well for the upcoming auctions and they include a lower spectrum cap, which limits the scope for aggressive bidding and rollout obligations for the 5G spectrum have also been eased.
Given the nascent 5G ecosystem and evolving use cases, 5G rollouts are expected to be gradual, starting with metros and larger cities and the fact that rollout requirements for 5G have been eased, lifts the pressure on the telcos. So the decks are cleared for the upcoming auctions.
Watch the accompanying video of CNBC-TV18’s Reema Tendulkar for more details.