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The weak financial health of Indian telecom service providers will continue to impact the prospects of acquiring new spectrum and the subsequent launch of 5G network in the country, said a report by the Competition Commission of India (CCI).

The 'Market study on the telecom sector in India' noted that spectrum ownership creates a competitive advantage for operators providing wireless access services and access to a larger quantum of the contiguous spectrum can increase operational efficiency.

"With the average spectrum holding for an Indian operator lower (31 MHz) than the global average of 50 MHz, the battered financial health will continue to impact operators' ability to acquire new spectrum and the subsequent launch of 5G in India," it said.

In terms of spectrum, the report observed that India has evolved towards a market-based approach, through licensed auction, though other regimes such as command and control models as well as generic licensing or common use models continue to prevail in other countries.

Since 2010, the Department of Telecommunications has applied the auction-based method for spectrum allocation. Over the six auctions held during the period 2010 to 2016, the government has auctioned only subsets of the total frequencies and the average reserve price in every subsequent auction has witnessed an upward revision.

In the upcoming auctions, the regulator has proposed a steep cut in the reserve price of the 700 MHz band, which saw no demand in the previous auctions and has also recommended making the entire spectrum available for auctions, it said.

The report also said that survival of all the three players is important for the market.

Technology-led convergence has made services less distinguishable, raising new challenges in defining relevant markets and establishing a level playing field.

"With the rule of three to prevail for maintaining competition in the industry (in light of the current financial distress that the industry faces), any exit would mean a virtual duopoly," it said.

In the long-term interest of competition and to reap spillover benefits that telecom affords for other sectors, survival is necessary, as per the CCI report.

"A strong and competitive sector augurs well for the deployment of new technology such as 5G, a weak sector will dull the incentives to innovate and compete."