Potential Rise in Mobile Bills Following 5G Spectrum Auctions

Spectrum Auction Results

Following the conclusion of the highly anticipated 5G spectrum auctions, analysts are predicting potential price hikes by telecom operators as they seek to offset the costs incurred from their bids. Reliance Jio, Airtel, Vodafone Idea, and Adani Data Networks collectively secured 51,236 MHz spectrum valued at ₹1,50,173 crore. This figure exceeds both government estimates and analyst projections.

Factors Driving Costs

Contrary to initial assumptions, the bulk of the spectrum was acquired at reserve prices, with aggressive bidding observed primarily in select circles such as UP East. Key drivers behind the soaring auction prices include Jio’s strategic acquisition of spectrum in the 700 MHz band and efforts by telcos to bolster their existing spectrum holdings.

Financial Implications

Analysts project a potential increase in industry debt levels to approximately ₹6 lakh crore by March 31, 2023, factoring in the spectrum liabilities. Addressing these financial commitments, telcos are considering two primary strategies: tariff hikes for existing subscribers or the introduction of 5G services at a premium.

Tariff Hike or Premium 5G Services?

According to a Nomura report, a modest 4% tariff hike could sufficiently cover the costs of 5G spectrum purchases. Alternatively, telcos may opt to introduce 5G services at a premium, potentially pricing plans at a 30% markup compared to existing offerings.

Regulatory Reforms and Industry Response

Recent telecom reforms, including zero spectrum usage charges and relief measures, have provided some respite to the industry amidst financial challenges. However, if 5G services are priced prohibitively, the state-owned BSNL stands ready to expedite its 5G rollout.

5G Service Rollout Timeline

Indian Telecom Minister Ashwini Vaishnaw has expedited the 5G spectrum allocation process, aiming for completion by August 10, shortly after the auctions. Anticipating a swift rollout, Vaishnaw expects 5G services to commence as early as October, with substantial nationwide coverage expected within a year.

Industry Readiness

Reliance Jio, with its extensive fiber network and all-IP infrastructure, is positioned to lead the 5G rollout in India. The company’s commitment to providing affordable yet high-quality 5G services reflects its strategic advantage over competitors Airtel and Vodafone Idea, who may face challenges associated with legacy technologies and subscriber bases.