Telcos to spend `1 trn in 5G auction

New Delhi: The telecom industry is expected to shell out around Rs 1-1.1 lakh crore on the 5G auction, despite telcos' reservations over high spectrum prices, Icra said on Wednesday but cautioned that sector debt level is likely to rise with upcoming auctions.

The auction of over 72 GHz of the spectrum is set to commence on July 26, 2022. According to Icra, given the relaxed payment terms for the auction, the upfront outgo is likely to be around Rs 10,000 crore for the industry. It said industry ARPU (Average Revenue Per User) is expected to increase to Rs 170 by the end of FY2023, driven by tariff hikes and consistent up-gradation of subscribers.

"While telecom operators consider reserve prices to be very high, nonetheless Icra expects telcos to buy spectrum worth around Rs 1-1.1 lakh crore in these auctions, which will be primarily towards developing 5G capabilities but also plugging other gaps," it said in a statement. While the upfront payment may remain low as Trai has recommended an elongated payment plan, the total debt on the industry is likely to increase, which is expected to keep the debt metrics subdued, the rating agency explained.

Icra's comments came in the wake of the Cabinet approval for the auction of airwaves capable of offering fifth-generation or 5G telecom services, including ultra-high-speed internet. The Union Cabinet also gave its nod to set up captive 5G networks by the big tech firms. The Cabinet has approved a 5G auction at reserve prices recommended by the sector regulator Telecom Regulatory Authority of India (Trai). Trai, in April this year, recommended about a 39 per cent reduction in the reserve or floor price for the sale of 5G spectrum for mobile services, although the industry, at that time, had termed the cost as being "too high". Icra observed that the telecom industry has been witnessing green shoots of recovery.

"The tariff hikes implemented by the industry participants coupled with consistent up-gradation of subscribers to 4G from 2G and increase in usage of telephony services is expected to result in improvement in industry ARPU (excluding BSNL) to around Rs 170 by the end of FY2023...," Icra said, noting that Indian telecom services industry is on the brink of a technology upgrade to 5G. Ankit Jain, Vice President and Sector Head, Corporate Ratings, Icra Ltd, observed that the regulator has come out with recommendations of relaxed payment terms, which allow telcos to pay for the spectrum in 20 instalments thus ensuring very low upfront outgo.