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Higher 5G base price to widen telcos’ debt

This, added to the existing payments of the operators, would result in the industry shelving out Rs 17,000 crore per annum, till the moratorium ends, he added.

The roads are now clear for the 5G auctions.
The roads are now clear for the 5G auctions.

The base price of 5G spectrum would result in a further deepening of telecom operators’ debts, even with a low upfront payment, as the industry expected to shell out about Rs 1-1.1 trillion in the upcoming auctions. The operators are of the opinion that reserve prices are on the higher side, and the industry’s debt is expected to rise to about Rs 5.7 trillion as of March 31, 2023. However, it will moderate to Rs 5.3 trillion as on March 31, 2025.

This comes at a time when the sector has been seeing green shoots of recovery following hikes in tariff and upgradation of 2G users to 4G services. The industry expects these initiatives to improve the average revenue per user (ARPU, a financial metric for a telecom operator) to Rs 170 by the end of FY23.

“The regulator’s recommendations of relaxed payment terms, which allow telcos to pay for the spectrum in 20 instalments ensures a low upfront payment. This also avoids any dent on the liquidity position and is also likely to boost participation,” Ankit Jain, vice president and sector head, Corporate Ratings at Icra, said. Icra, which estimates an outgo of about Rs 1-1.1 trillion, pegs the upfront payment to be at Rs 10,000 crore. This, added to the existing payments of the operators, would result in the industry shelving out Rs 17,000 crore per annum, till the moratorium ends, he added.

“Wide availability of spectrum across all bands is encouraging as potential bidders can opt for bands and quantum as per their strategy. Having said that, the base price remains an issue for the bidders who were expecting a much lower rate. Clarity around captive spectrum allocation to enterprises directly has been another issue,” Jaideep Ghosh, chief operating officer of Shardul Amarchand Mangaldas & Co, said.

“The roads are now clear for the 5G auctions. This is probably one of the most-awaited spectrum auctions which will bring significant advancements for the industry and the consumers. The good part is that the spectrum across bands will go under the hammer shortly. The government has also announced auction of mm Wave band which will not only help in unlocking the true potential of 5G but will also help strategically manage costs for the operators,” Peeyush Vaish, partner and telecom sector leader at Deloitte India said.

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