India lowers its expectations for spectrum sales in 2020

A recent ruling by India’s Supreme Court over the way telos calculate their adjusted gross revenues (AGR) has left the country’s telcos with huge levels of debt and no free cash to invest in spectrum
India, Spectrum, DoT, TRAI, 5G, 4G


The Indian government may only raise around $1.4 billion (INR 10,000 crore) in initial payment revenues at its forthcoming spectrum auction, as two of the country’s three mobile network operators battle against enormous financial challenges this year.

The recent AGR ruling by India’s Supreme Court has left Vodafone Idea and Bharti Airtel with outstanding dues of around $12.4 billion (INR 89,000 crore) and the payment of these dues will seriously impede their ability to invest in spectrum, experts suggest.

A report in the Economic Times of India quoted government sources as saying that the government was lowering its expectations accordingly.

“Of the three players, Jio may take some 5G spectrum but not much, besides some 4G. We expect it will do so to get the firstmover advantage,” a government official told the ET.

Due to the payment structure of spectrum licences in India, initial revenues of $1.4 billion in 2020 could reflect total sales of up to $5.6 billion. In India, telcos pay 25 per cent of the sale price up front for spectrum in the sub 1GHz bands and 50 per cent up front for higher band spectrum. The balance is then paid over a 16 year period.

At an industry event in Delhi last year, Bharti Airtel’s CEO Gopal Vital claimed that Indian telcos would each require 1,000MHz of spectrum to provide a genuine 5G experience to their subscribers.

“Indian operators need 1,000MHz of spectrum, each, in order to do 5G properly. There is a lot of work to be done freeing up mmWave spectrum in the high bands. Even when you talk about spectrum in the mid band, the 3.5GHz spectrum, every operator is going to need 75-100MHz of spectrum, otherwise you will see a 5G icon displayed on your phone, but in reality you will just be getting a 4G experience,” he said, speaking before the Supreme Court’s AGR ruling.

It remains to be seen how much of a chilling effect the Supreme Court’s AGR ruling has had on the country’s appetite to invest in 5G spectrum and the extent to which this will ultimately delay 5G rollout in the world’s second largest telecoms market.

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