The telecom industry is expect to shell out around Rs. 1-1.1 lakh crore on the 5G auction, despite telcos’ reservations over high spectrum prices, ICRA said but caution that sector debt level is likely to rise with upcoming auctions.
The auction of over 72GHz of the spectrum is set to commence on 26th July, 2022.
According to ICRA, given the relax payment terms for the auction, the upfront outgo is likely to be around Rs 10,000 crore for the industry.
It said industry ARPU (Average Revenue Per User) is expect to increase to Rs 170 by the end of FY2023, driven by tariff hikes and consistent up-gradation of subscribers.
ICRA Said in statement :
While the upfront payment may remain low as TRAI has recommended an elongate payment plan, the total debt on the industry is likely to increase, which is expect to keep the debt metrics subdued, the rating agency explain.
ICRA’s comments came in the wake of the Cabinet approval for the auction of airwaves capable of offering fifth-generation or 5G telecom services, including ultra-high-speed internet.
The Union Cabinet also gave its nod to set up captive 5G networks by the big tech firms.
The Cabinet has approve a 5G auction at reserve prices recommended by the sector regulator Telecom Regulatory Authority of India (TRAI).
TRAI, in April 2022, recommend about a 39% reduction in the reserve or floor price for the sale of 5G spectrum for mobile services, although the industry, at that time, had term the cost as being “too high”.
ICRA observe that the telecom industry has been witnessing green shoots of recovery.
ICRA Said :
Ankit Jain, Vice President and Sector Head, Corporate Ratings, ICRA Ltd, observe that the regulator has come out with recommendations of relaxed payment terms, which allow telcos to pay for the spectrum in 20 instalments thus ensuring very low upfront outgo.
Ankit Jain Said :
According to ICRA, while the upfront payment will be low, the participation will lead to an addition in defer spectrum liabilities, and in turn, the total debt of the industry.
ICRA Said :
Telecom operators have focusing on deleveraging, it said, but adds that defer liabilities continue to keep the debt levels elevate.