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TRAI releases its 5G spectrum recommendations

Wanting For More…

TRAI released its much awaited recommendations for auction of 5G spectrum, slated to be conducted in CY22, to facilitate the rollout of 5G mobile services in India. Below are the key highlights:

* TRAI has offered spectrum across all bands: 600MHz to 3,300MHz-3,670MHz, and mmWave spectrum.

* It has cut the reserve price of spectrum by ~40% across bands for a 20-year license, including key 5G bands (3,300-3,670MHz and 700MHz). Adjusting for the 1.5x increase in the reserve price of spectrum for a 30-year license, the price drop is hardly 3-10%.

* It has remained silent on the key bone of contention –payment terms (upfront payment, moratorium period, and tenure).

* A pan-India 50MHz of 3,300-3,670MHz, or 5MHz of 700MHz, spectrum may require an outlay of INR238b, or INR295b, and entail an upfront investment of INR60b, or INR70b, assuming 25% upfront payment, with annual EMI payments of ~INR15b over 16 years.

* Bharti/RJio’sstrong FCF of over INR200b/INR250b and the former’s uncalled right issue of INR160b issufficient to meet its investmentsin 5G spectrum. But the risk of higher capex toward 5G does increase with the lack of a sharp fall in pricing.

Spectrum galore

TRAI has recommended all available spectrum be put to auction in existing (700MHz, 800MHz, 900MHz, 1,800MHz, 2,100MHz, 2,300MHz, and 2,500MHz) and new bands (600MHz, 3300-3670MHz, and mmWave or 24.25-28.5GHz). It has recommended that a total of 6,358MHz of paired spectrum (excluding mmWave spectrum) be put up for auction. In line with DoT’s recent relief package, it has recommended providing a five-year spectrum roadmap, with an annual schedule, so that telcos can plan theirlong-term spectrum requirements.

The reserve price for a 30-year license period sees a nominal reduction

TRAI has cut the reserve price across bands by ~40% for a 20-year license period, with the 700MHz and 3300-3600MHz – the two key 5G bands – seeing a 40% and 36% price cut v/s their respective previous reserve prices. It has suggested a 1.5x rise in the reserve price ofspectrum for a 30-year license, implying an effective cut of a mere 3-10% in the reserve price from earlier levels, but with a 10-year increase in the license period. The industry has been aggressively pitching for a drastic 80- 90% cut in spectrum prices to proactively participate in 5G investments, unlike previous auctions.

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