The National Company Law Tribunal courtroom of MK Shrawat and CB Singh in Mumbai was empty on the afternoon of November 27, though a vital order for the beleaguered telecom sector was due that day. The court was to decide whether Aircel, the insolvent telecom operator, could retain the right to use its allotted portion of airwaves, and make it count as an asset in the ongoing debt-resolution process.The order was finally available on the website past midnight, around 12.30 am on Thursday. It said, much to the relief of Aircel’s creditors, the Department of Telecommunication (DoT) could not take away the telecom spectrum from the bankrupt company.The implications of the order went beyond Aircel: the Anil Ambani-promoted Reliance Communications had filed for bankruptcy in February. The DoT had wanted to take back spectrum from mobile telephone service operators who have not paid their dues so that it can reauction them. For telecom players, the right to use spectrum for the licence period is an asset that they can transfer to other bidders. 72312266 Like the court of Shrawat and Singh, much of Indian telecom sector is today burning the midnight oil to figure a way out of the mess it finds itself in. From 10 private sector telecom operators not so long ago, India now has only three major mobile telecom players — the Sunil Mittal-led Bharti Airtel, the Aditya Birla Group and Vodafone Group venture Vodafone Idea and Mukesh Ambani’s Reliance Jio. A battle of attrition over tariff between the three, after Reliance Jio entered the market and grabbed almost a third of the market share, has seen the operators’ cash flows shrink rapidly over the past three years. The industry’s annual revenues have largely been stagnant since FY2015, while cumulative debt has multiplied to Rs 7.64 lakh crore from Rs 2.8 lakh crore in the same period. At the same time, there is consumer dissatisfaction over low-quality network. While some companies are in the bankruptcy courts, Airtel and Vodafone are trying to deal with a `92,000 crore blow from the Supreme Court in a 16-year-old case related to revenue calculation.It does not bode well for the sector that it has to deal with these issue at a time when the world is talking about adopting 5G technology — the next generation of super-fast wireless communication technology. South Korea has already rolled it out in Seoul and Indian companies were about to start their own pilot projects. Union Telecommunication Minister Ravi Shankar Prasad had said the government plans to auction extra spectrum for 5G services by early next year. However, this seems to be the worst of times for 5G rollout. 72312271 Talking of 5G now when every company is haemorrhaging cash, says a former CEO of an Indian telecom company who didn’t want to be named, is akin to Nero playing the fiddle while Rome was burning. Sanjay Kapoor, former CEO of Bharti Airtel, says the enthusiasm for 5G across the world is being driven by equipment makers, like Huawei, Nokia and Ericsson, and the governments, but the device ecosystem is still lagging. “Use cases for 5G have to be fully developed for every market and then monetisation plans have to be worked out. There is much work left to do,” he says. Despite the challenges facing the sector, the government’s plan to auction airwaves would open the supply taps. A total of 8,644 MHz of airwaves might be put up on offer, though the previous spectrum auction saw poor response. In 2016-17, the government could sell only 41% (965 MHz) of the spectrum on offer. It raised about Rs 65,000 crore though the base price of the entire spectrum value on the block was pegged at Rs 5.6 lakh crore. A mega-auction has been in the works for some time now, along with spectrum for 5G technology, in the 3,300-3,600 MHz band. 72312277 For the upcoming auction, the Telecom Regulatory Authority of India has suggested a base price of Rs 492 crore per MHz for 5G spectrum. Operators are almost unanimous that they would need 100 MHz each to roll out 5G, which means they would have to pay nearly Rs 50,000 crore each for the spectrum fee alone. This would make it the highest priced 5G spectrum in the world.Despite the abundance of supply, demand during auction might be low due to other problems. Aircel and Reliance Communications will not participate as they are in insolvency courts. Airtel, Vodafone Idea and others are dealing with the massive financial blow after the Supreme Court in October ruled that licence fees of operators need to be calculated on the basis of their adjusted gross revenues, and not their telecom revenues alone. In an attempt to give some relief to the companies struggling with high debt and huge losses, the government then announced a two-year moratorium on payments of spectrum dues. For Bharti Airtel, the ruling means an additional burden of Rs 35,000 crore on pending dues. Vodafone Idea has dues of around Rs 53,000 crore. Vodafone Global CEO Nick Read had in November reportedly hinted at virtually writing off the India investments, although he retracted and apologised a day later.Bharti Airtel has moved a petition in the Supreme Court seeking permission to negotiate with the government to find a way to reduce the burden. Vodafone has also moved the court for relief. 72312290 The third operator, Mukesh Ambani-promoted Reliance Jio, has much lower dues at Rs 60 crore, mostly because it is a recent player and has already paid a part of the dues. However, sources say, Reliance Jio might also go slow on 5G. For the quarter ended September 30, Bharti Airtel posted a loss of Rs 23,044 crore and Vodafone Idea reported a loss of Rs 50,921 crore. Jio posted a 45% rise in profit at Rs 990 crore.Reliance Jio, Vodafone Idea and Bharti Airtel did not respond to queries. Chairman of Inditrade Capital and market analyst Sudip Bandyopadhyay points out that while the government has announced a moratorium for spectrum payments to help the industry, it cannot expect a good spectrum auction at the same time. “It is best for the government to not do 5G auctions now, because if it does, who is going to buy? And how will it get a good price in this kind of a market? Even if Reliance Jio participates, it will get the auction at a low price and will be able to hoard it.”Much of the woes of the telecom sector, including the bankruptcy of some of the operators, can be traced back to the entry of Reliance Jio and the tariff battle that followed. However, Reliance Jio, after gaining about one-third of the market, has now raised tariff, signalling an end to the battle. Director General of the Cellular Operators Association of India (COAI) Rajan Matthews says the sector needs time to settle down. “We do not believe that the time is ripe for 5G auctions. 72312297 The concerns around financial health of the sector must be resolved immediately. Hence, we are of the view that the government should not rush to spectrum auctions and should wait for the market to settle down.”A Tech PuzzleBeyond the financial issues, the sector is also facing technical problems. Kapoor, who sits on the board of Saudi Telecom, which launched 5G services in Saudi Arabia in June, says the road to 5G is complex in India. He lists out a few necessary changes that Indian operators must implement first before looking at the next-gen technology. Much of the margins in 4G were taken away by the content players who rode on the bandwidth, he says. For 5G, the telecom operators need to get this margin balance right. Also, he says, a big difference will be that 5G is likely to have more focus on B2B operation, and the operators will need to set up a fresh marketing machinery to sell the same. There would be manufacturing and service sector applications, like robotics or tracking and even financial sector applications, in 5G.On the technical front, Kapoor points out that 5G is a higher speed network with low latency (the time it takes for a request for data to reach the server and for the data to reach the user). This allows it to be used for critical applications, such as driverless cars, which need a strong fibre network connection. There cannot be any dark spots in the network for such applications. 72312302 “Complete coverage across India may be uneconomical,” Kapoor says, adding that while inter-city fibre may be available, India lacks enough intra-city fibre.High InvestmentPrashant Singhal, technology, media and telecommunication leader for emerging markets at EY, says the investments that need to go in for 5G in India are likely to be much higher than those for 3G or 4G networks and there is no need to rush into it. “The 4G auctions had happened in 2010 and the rollout happened only by 2015-16. We do not want such a situation in 5G also,” Singhal cautions.E&Y has estimated that it would cost $100 billion or so to launch 5G in India. The government has announced a moratorium on spectrum fees payments and has asked the GST Council to help lower the tax burden. Given this situation, Singhal says, where is the question of doing a successful spectrum auction, leave alone a 5G launch.To be sure, work has already started on trials and development of 5G use cases. Ericsson has set up Centre of Excellence and Innovation Lab for 5G at the Indian Institute of Technology-Delhi. Intel has inaugurated the Intel Design Center, its new R&D facility for 5G and artificial intelligence, in Bengaluru. The DoT in June flagged off 5G trials, stating the trials would go on for a year. But the early-2020 target for 5G spectrum auctions looks impossible to achieve.“India can and will adopt 5G in good time,” adds Matthews of COAI.
from Economic Times https://ift.tt/37VZ6gm
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