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Monday, May 20, 2024

Limited airwaves and high costs deter new entrants, analysts claim

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In Short:

Analysts suggest that the high cost of $16 billion and limited spectrum availability have deterred new bidders from participating in the upcoming 5G spectrum auction in India. Existing players like Reliance Jio and Bharti Airtel have already deployed 5G nationwide. The lack of spectrum in key markets and the high investment needed for network rollout make it difficult for new entrants to compete effectively.

New 5G Spectrum Auction Sees No New Bidders

An estimated initial requirement of $16 billion (Rs 1.36 lakh crore) for 5G airwaves and network rollouts, along with limited spectrum availability in key bands, has deterred new bidders from participating in the upcoming spectrum auction, according to analysts.

Key Factors Leading to Lack of New Bidders:

  • Only Reliance Jio, Bharti Airtel, and Vodafone Idea have applied to participate in the 5G airwaves sale starting June 6.
  • Availability of only 50 MHz of 5G spectrum in the 3.3 GHz band in major markets.
  • New entrants would ideally need 100 MHz in each of the 22 circles for effective nationwide 5G rollout.
  • ICICI Securities estimates upfront investment for a new entrant deploying greenfield 5G services in India to be around Rs 1,35,800 crore.

Analysts’ Perspective:

“That no new company is participating in the upcoming auction comes as no surprise, given the massive investments entailed in both airwaves and pan-India network rollouts,” said Mahesh Uppal, director of Com First India.

Challenges for New Entrants:

  • Lack of clean coverage/capacity spectrum.
  • Insufficient spectrum supply in key markets like Gujarat, Haryana, and the Northeast.
  • Weak spectrum supply in critical bands like 1800 MHz and 2300 MHz.

“With only 50MHz availability in the 3.3 GHz band in major circles, a new telco entrant would end up offering a weak 5G service vs peers (Jio and Airtel),” Uppal added.

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