5G airwaves pricing reasonable, says Trai chairman

The telecom regulator has rejected criticism by the industry on the pricing of 5G airwaves. Telecom Regulatory Authority of India (Trai) chairman PD Vaghela termed the rates “reasonable”, saying they have been arrived at after considering various factors including quantum of spectrum offered, competition in the market and profitability.

Vaghela has also defended the recommendations on allowing private enterprises to directly obtain 5G spectrum from the government and establish their own captive networks. He said this would lead to better spectrum utilisation, adding that the reality around Industry 4.0 and subsequent economic growth cannot be overlooked.

“Whatever Trai does, it does in a very professional manner. We haven’t rejected any views without giving any reasons,” Vaghela told ET. Trai’s suggestions on captive networks are in line with global norms, he said, as many countries have given bandwidth to private enterprises.

‘Many Factors at Play’

Global benchmarks should, however, not be the only factor while pricing spectrum, the Trai chairman said.

Simply benchmarking against price per MHz in Purchasing Power Parity terms may also not be the right way, he said, as it ignores factors like quantum of spectrum offered, competition in the market, average revenue per user (ARPU) levels, profitability, etc., resulting in wrong estimations. “We have to consider the size of the country, the GDP projections…,” he said.

Vaghela’s response came on a day when telecom industry body COAI, which represents all three private telecom operators – Bharti Airtel, Reliance Jio and Vodafone Idea – had termed Trai’s recommendations as “deeply disappointing” since they had cut 5G spectrum prices by only about 40%, much lower than the industry’s demand of a 90% reduction, in line with ‘global norms’.

During the day, Sunil Mittal, chairman of Bharti Enterprises, met finance minister Nirmala Sitharaman. The content of the meeting could not immediately be known.

The suggested reserve price of C-band 5G spectrum (3.3-3.67 GHz) – despite a 36% reduction to Rs 317 crore per MHz – is effectively around $40 million per MHz, said Prashant Singhal, global TMT emerging markets leader at consultancy EY.

This is several times higher than the $16 million per MHz, $11 million per MHz and $10 million per MHz pricing of similar airwaves in Germany, the UK and South Korea, respectively.

Vaghela, however, pointed out that Trai’s recommendations “present a reasonable valuation obtained from an appraisal of the results of different models which has a good probability of realisation in the actual world”.

International benchmarking may be done only in those bands for which sufficient market data is not available for India, he added.

COAI has argued that increasing the price of 5G spectrum by 1.5 times when it is allotted for 30 years goes against the spirit of the telecom reforms package.

“If one were to look at the pan-India price of 3.5 GHz spectrum, then we are back to square one with effectively no change,” the industry body has said.

The regulator’s recommendations, in effect, nullify the decision of the Union Cabinet – to increase the tenure of right to use spectrum to 30 years from 20 years – in the telecom relief package of 2021, it said.

Vaghela rejected the argument.

He said the recommendation was in fact in line with government policy.

“We are following the timeline that auctions are held for giving out spectrum for 20 years and then there is an auction to renew those airwaves. Now, when the time frame increases from 20 to 30 years, we need to factor the pricing of those airwaves for 30 years,” he said.

The flexi payment option that the regulator had recommended would ease any financial burden on operators and facilitate long-term growth and sustainability of the telecom sector, he added.