Telecommunications

Official of the DoT, Telecom News, ET Telecom

NEW DELHI: With the abolition of Spectrum Usage Charges (SUC) on the airwaves to be purchased at the next auction, telecom operators will achieve an effective cost reduction of 40-50% in their annual payment to the government, said a senior government official.

“This is on top of the 39% cut that Trai (Telecom Regulatory Authority of India) had recommended from 2018 prices and that should come as a relief to telecom operators,” the official told ET, asking not to. to be named.

On April 11, Trai had recommended a reserve price of Rs 317 crore per unit for airwaves in the premium 3.3-3.67 GHz 5G band (also known as C-band), a reduction of 36% from compared to its last recommendation in 2018. It had also cut the recommended price for the coveted 700 MHz spectrum by 40%, to Rs 3,297 crore per unit. On average, Trai reduced its prices by around 39%.

But telecom operators had said prices were still too high, especially compared to global benchmarks, and called for a 90% reduction in the airwave reserve price from 2018 levels.

But the official said that according to a back-of-the-hand calculation, if a telco buys 100 Mhz of 5G spectrum (in the 3,300 MHz band) for around Rs 32,000 crore and another 1 Ghz in the millimeter wave band (26 GHz) for Rs 8,000 crore, then the total price of purchased spectrum becomes Rs 40,000 crore.

“At net present value, the annual outlay for a telco on this spectrum would be Rs 3,300, but with zero SUC the payment would perhaps be reduced by 50%,” the official said.

In a statement, Prashant Singhal, Emerging Markets Leader of EY Global TMT, called the removal of SUC one of the main highlights of the 2022 NIA spectrum auction.

“The SUC paid by carriers currently ranges between 3-5% of Adjusted Gross Revenue (AGR) depending on the year of acquisition and the 0% SUC will be a welcome relief to carriers and allow for faster deployment of 5G,” Singhal said.

The Cabinet also allowed companies to take spectrum directly from the DoT to establish their private captive networks. However, the DoT will first identify chunks of bandwidth in certain bands and also assess the demand for those airwaves, after which the telecom regulator will hold consultations with stakeholders to decide whether to allocate or price the spectrum.

The cabinet, meanwhile, on Tuesday approved the sale of 72,097.85 MHz of spectrum with a validity period of 20 years. The auction will be for spectrum in various bands including the 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 3300 MHz and 26 GHz frequency bands.

The Trai in its recommendations of April 11 had suggested that the waves in the 3700-3800 MHz band, the 4800-4990 MHz band and the 28.5-29.5 MHz band could be allocated directly to private companies for the establishment of their captive networks. However, the DoT had set that aside for later, approving only three methods for private captive networks, all three requiring a telecom operator to first win the spectrum in the auction.

“After identifying spectrum that could be allocated and unlocking it, the DoT will send a referral to the regulator to finalize terms such as auction or bandwidth allocation,” the official said.

However, he added that the exercise is expected to take time but did not say whether it will take place by the end of the year or not.

Private captive networks had been a point of tension between telecom operators and technology players, with the former wanting all allocation to be done through telecom operators. Otherwise, they said, it would kill any business case for telecom operators in the 5G space. As B2C use cases have yet to be developed, 5G as a technology is expected to be deployed in the B2B space first and is expected to be the main revenue generator, analysts say.