Telecom industry urges ‘significant’ reduction in 5G spectrum prices, cites viability

Will take industry at least five years to realise profits on 5G investments: COAI

The Cellular Operators Association of India is pitching for a ‘significant’ reduction in 5G spectrum prices recommended by sectoral regulator TRAI to ensure a ’viable business’ case. The association flagged that it would take the telecom industry at least five years to realise profits on the huge investments that would go into 5G roll-outs.

“The prices for 5G spectrum will be determined by demand and supply, and currently there is really no viable business case for 5G, not only in India, but world over,” COAI director-general S.P. Kochhar said.

Pointing out that even developed countries, where 5G had been introduced, were expecting maximum revenue to come from enterprise customers. However, that has not happened and only about 10-15% revenues were coming from enterprises in nations where there are industrial applications that can use 5G. “Therefore, the revenue flows are not as great as anticipated,” he said.

Mr. Kochhar said India was a very price-sensitive market and the ecosystem for 5G had not yet arrived. “So which industry will bring revenues for 5G? It will happen, but will take time. So, till then, we will have to invest huge amounts in spectrum, in radios and in networks, ...with profits being seen maybe 5-6 years down the line. So it is a dead investment for those five years…It should be a viable business case that we get spectrum at an affordable cost that does not make us bankrupt or make all our money go down the drain till the time the anticipated use case comes, if at all it comes. That is why we are asking for a major reduction in spectrum costs,” he explained.

He stressed that the government would not lose out in the overall game plan because up till 4G, they were getting revenues from spectrum and taxation on consumer tariff. However, now all industries are going to ride on 5G, their production capacity and profit margins will increase and hence, their contribution in the form of taxation to the exchequer was going to increase massively, he pointed out.

“If you don’t let that foundation of 5G get built strongly, then you are losing out on that also. So, if you are only looking at revenue from telecom operators for 5G roll out… that will be miniscule if you compare it to what you can get over a few years from the industries who benefit. That is our argument.” he said.

Recently, Telecom Minister Ashwini Vaishnaw has said that everything was “more or less” on track for auction of spectrum, including 5G airwaves, by June 2022, and that the government was confident of resolving the spectrum pricing issue with the industry.