India’s 5G rollout dogged by uncertainty

While the Indian government wants the 5G auction to take place by early next year, there is little enthusiasm among mobile phone companies.

The Cellular Operators Association of India said mobile phone operators may push back 5G network deployments by at least five years due to insufficient spectrum and high base prices.

The association represents all the private telecom players – Bharti Airtel, Reliance Jio and Vodafone Idea – as well as gear makers such as Huawei, Ericsson, Cisco and Ciena.

The Director-General of the association, Rajan Mathews, pointed out that initially there was a pricing problem, but now there is also an issue of lack of availability of enough spectrum, which will lead to delays in 5G commercial rollouts, the Economic Times reported.

Most operators feel that paying 4.9 billion rupees (US$68 million) for 1 MHz was not viable. For a purchase of 100 Mhz of airwaves, an operator would need to pay at least 500 billion rupees ($7 billion).

Industry experts point out that the average price of 5G band auctioned in countries such as South Korea, Spain, the UK and Italy was about 840 million rupees per MHz.

Even Reliance Jio, which is at loggerheads with rivals Bharti Airtel and Vodafone Idea, said the price was high. It also backed the view held by its rivals that 4G airwaves be auctioned as soon as possible, to keep pace with the surging demand for data and to ease network congestion.

Inadequate spectrum

Initially, the Telecom Regulatory Authority of India had earmarked 300 MHz spectrum in the 3,300-3,600 MHz band for 5G. But now it seems out of that, 100MHz will go to the defense forces and 25MHz to the space department. The leaves only 175MHz for telecom players to rollout 5G spectrum and that is much below their demands of 100 MHz of spectrum per player.

The government initially said it wanted to hold auctions by March 2020 and 5G rollouts by the end of next year. But industry experts are skeptical of this timeline.

Swedish gear maker Ericsson said 5G subscriptions were expected to be available in India only by 2022 and revised its previous expectations that it would be commercially available in 2020.

Telecom stress

The industry is weighed with a cumulative debt of 7.5 trillion rupees ($105 billion) and is under financial pressure owing to ongoing price wars, with Relianc Jio the only company making profits.

The other two private carriers, Airtel and Vodafone Idea, have been hit with combined adjusted gross revenue dues of more than 890 billion rupees ($12.45 billion) after a recent Supreme Court order.

Telecom companies had contended they should pay the fees based on the earnings from their core telecom businesses. But the telecommunications department argued that the earnings from handset sales and other sources of income should be part of it.

The Supreme Court upheld the demand raised by the telecommunications department.

Recently, UK-based Vodafone Group Plc’s Chief Executive Officer Nick Read expressed concern over the financial stress faced by Vodafone Idea, which has been posting losses since the formation of a joint venture with India’s Idea Cellular in August last year. Read pledged not to put any more money into the venture.

In the recent September quarter, both Vodafone Idea and Bharti Airtel reported massive losses. Vodafone Idea reported a loss of 509 billion rupees (US$7 billion), the biggest in Indian corporate history.

This was nearly double the previous record held by Tata Motors (269 billion rupees, or $3.74 billion) in the December quarter of 2018. Bharti Airtel also posted its highest loss ever of 230.45 billion rupees ($3.2 billion).