Immature ecosystem for 5G does not make a strong business case for the spectrum purchase: Ind-Ra

The firm also pointed out that Reliance Jio Infocomm Limited's all-IP data network, along with the latest 4G LTE technology, makes it future-ready, as it can support the 5G technology.

|

The already high leverage levels of telecom companies and their existing capex priorities would constrain their participation in the 5G spectrum auctions, despite the low recommended reserve prices, research firm India Ratings said.

 
Immature ecosystem for 5G does not make a strong business case

The research firm on Tuesday said that the immature ecosystem for 5G does not make a strong business case for the spectrum purchase.

 

The operators' ability to re-farm existing spectrum holdings to 5G from 2G, 3G and 4G would be another factor affecting the relative levels of 5G spectrum's supply and demand.

The firm also pointed out that Reliance Jio Infocomm Limited's all-IP data network, along with the latest 4G LTE technology, makes it future-ready, as it can support the 5G technology.

Meanwhile, the parent company Reliance Industries Limited continues to provide tangible support to Reliance Jio for its debt servicing, on the other hand, Sunil Mittal - led Bharti Airtel Limited had a net debt/EBITDA ratio of 3.6x in 1QFY19.

Vodafone India Limited and Idea Cellular Limited on a combined basis had a pro forma net debt/EBITDA position of 10x in FYE18.

In the upcoming auction 7,462MHz of the total spectrum is recommended to be put on the block, which is 3.2x of the supply offered for the auction in October 2016. The spectrum which is now proposed for auction is more than the total spectrum held by the industry, which will make its offtake difficult.

TRAI also recommends that the reserve price of the 700MHz band should be equal to 2x of reserve price of the 1,800MHz spectrum band. This is 42 percent lower than the price for 700Mhz in the earlier auction

The price for 2,100Mhz airwaves is also 56 percent lower than the previous auction reserve price. TRAI recommends that the reserve price of the 3,300-3,600MHz band should be equal to 30 percent of the reserve price of 1,800MHz FDD band.

The firm said 3,300-3,600Mhz bands of spectrum, also known as mid-bands, have been globally identified as primary bands for 5G and have already been assigned in a number of global markets.

Moreover, 5G standards are still in development stage and the technology/device eco-system is evolving.

Therefore, TRAI has not prescribed coverage related rollout obligations. However, to avoid any misuse of not mandating any rollout obligations, the lock-in period for spectrum in this band for becoming eligible for spectrum trading is recommended to be longer at five years instead of two years.

Spectrum in the 3,300-3,600MHz band should be put to auction in the block size of 20MHz. To avoid monopolization of this band, there is also a recommendation to cap 100MHz/bidder as the maximum bidding limit, India Ratings said.

TRAI recommends that the average expected the valuation of spectrum band should be the higher of the average expected value of that band based on simple mean or the auction-determined price of October 2016.

TRAI has relied upon market discovered prices of a comparable spectrum band and applied a technical efficiency factor to arrive at the valuation of the spectrum bands being put to auction for the first time.

The 700MHz spectrum band is regarded as both CAPEX and OPEX efficient for LTE networks in comparison to deployment for higher spectrum bands.

Best Mobiles in India

Read More About: spectrum telecom news 5g trai

Best Phones

Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Yes No
Settings X
X