Indian telcos' 5G bids seen muted as private firms jostle for airwaves -sources

IIFL Capital Services

30/06/2022 09:00

* India has allowed private firms to setup private 5G
networks
    * Private firms don't need to bid, have to pay application
fee
    * Telecom giants stare at lower 5G revenues after India
decision
    * Government, other companies argue move will boost
innovation

    By Aditya Kalra and Munsif Vengattil
    NEW DELHI, June 30 (Reuters) - India's telecom giants are
likely to make muted bids at the 5G spectrum auction in July, on
worries they stand to lose about 40% in potential revenues due
to the allotment of some airwaves to enterprises for private
networks, industry sources said.
    Top player Reliance Industries'  RELI.NS  Jio and rivals
Bharti Airtel  BRTI.NS  and Vodafone Idea  VODA.NS  have failed
to lobby New Delhi to stop the allocation that will let various
enterprises, including Amazon.com and Tata Consultancy Services,
to get airwaves without auction.  urn:newsml:reuters.com:*:nL1N2Y20BW
    "The telecom companies are quite upset, there will be an
estimated 40% potential 5G revenue loss," said S.P. Kochhar,
director general of Cellular Operators Association of India,
which represents the three telcos.
    They were counting on demand from the enterprise side to
justify investments worth billions of dollars as uptake by
price-conscious retail consumers will be slow, Kochhar added. 
    "That is a major disappointment."
    The rise of private 5G networks dims the business case for
the telcos, which are now likely to make muted bids in the
auction, five other telecom industry executives told Reuters.
    Reliance, Airtel and Vodafone did not respond to Reuters
emails requesting comments.
    The government, however, has said that permitting private
networks, like in South Korea and Germany, would spur innovation
of automation and other technologies in places like factories or
ports, without worrying about bandwidth or latency issues.
    Broadband India Forum (BIF), which represents tech firms
like Tata Consultancy  TCS.NS  and Amazon.com  AMZN.O , has said
private 5G networks will accelerate digital transformation.
    
    'RISK OF DILUTION'
    The launch of 5G services in the world's No.2 mobile market
after China is a "watershed moment" for the country and the
global 5G market, research group Omdia said this month. 
    About 50% of India's enterprises want to start using 5G
within 12 months and private network suppliers are in demand,
Omdia said in its report.
    Analysts at India's IIFL Securities flagged a "risk of
dilution to telcos' 5G-linked upside from enterprises".
    Telecom companies have already complained of "too high" base
5G spectrum prices, seen as among the highest in the world.
 urn:newsml:reuters.com:*:nL2N2W91A9
    And now with private networks expected to chip away at
demand, telecom giants are likely to only bid for four of the 10
bands on offer for an estimated $9 billion, IIFL said.
    Industry group GSMA says overall spectrum costs in India as
a proportion of telcos' annual recurring revenue stood at 32%,
the highest in the world.
    The bleak outlook comes as Airtel and Vodafone reel from a
price war triggered by Reliance in 2016.
    Airtel and Vodafone have reported losses in recent years,
squeezed also by spectrum dues to the government, though recent
mobile data price hikes have slowly started helping at least the
former to clock profits.  urn:newsml:reuters.com:*:nL3N2X922C
    
    CAPTIVE NETWORK
    The potential loss for telecom firms is a boon for companies
planning to introduce private 5G network services. Globally,
over two dozen countries have paved the way for such networks.
    India has said there would be no entry or license fee for
10-year licences for private networks, which can be built by
firms with a net worth of over 1 billion rupees ($13 million).
    They will have to pay an application fee of 50,000 rupees
($634). It is not clear if there will be any other charges.
    The spectrum will be assigned after "demand studies" and
regulatory clearances.    
    The government aims to begin the rollout of 5G - which can
provide much faster data speeds than 4G - by spring 2023.
    A public telecom network optimises needs of the masses, but
the varying demands of an enterprise "can be achieved only
through dedicated captive private 5G networks", BIF has said.
    "Private 5G networks provide India an excellent opportunity
to catch up with the world," BIF said in a statement in June.

 (Reporting by Aditya Kalra and Munsif Vengattil in New Delhi;
Additional reporting by Supantha Mukherjee in Stockholm; Editing
by Himani Sarkar)
 ((munsif.vengattil@thomsonreuters.com;))