Centre considers cutting 5G prices to offer telcos relief from increased costs of China ban

Economics Times
July 29, 2020

       The government may consider lowering the base price of 5G spectrum to compensate telcos if they have to shell out more for buying non-Chinese equipment.


Officials said the government was aware that keeping Chinese vendors Huawei and ZTE away from India’s 5G market may push up network deployment costs and is thus open to reassessing the base prices suggested by the regulator to make it viable for operators.


“Procurement procedures are being reworked, surveillance has become a global issue and companies such as Huawei and ZTE whose ownership is questionable are going to increasingly find it tough to get contracts,” one official told ET.


In such a scenario, excluding Chinese vendors was “a natural progression or outcome of the concerns arising out of national security for countries,” the official said.


Base rates too high
Experts said the absence of Huawei and ZTE would leave Indian telcos dependent on European vendors Ericsson and Nokia, besides South Korea’s Samsung. This would increase deployment costs by 15-20%, ultimately hurting retail and industrial customers.


The officials said the government is aware of the cost implications, especially as the two Chinese companies have historically offered the lowest rates for telecom equipment.


Private telcos Bharti Airtel NSE 0.28 %, Vodafone Idea and Reliance Jio have termed the Telecom Regulatory Authority of India’s suggested base price of Rs 492 crore per MHz for 5G spectrum too high. CLSA said in a report that the suggested price was the most exorbitant in the world, with rates in Italy, the US, South Korea and the UK being much lower.


According to another government official, the Digital Communications Commission has accepted Trai’s 4G base price recommendations and is yet to decide on the regulator’s 5G pricing suggestions. The commission is an inter-ministerial body that is the highest decision-making group in the department of telecommunications.


“This leaves a window of opportunity for the government to lower the 5G prices so that there is better competition during the auction,” the official said.


The 4G spectrum auction is likely in October-November, while 5G airwaves may be offered only next year. While the 4G bands can be used to provide 5G services in the future, India has currently earmarked only the 3,300-3,600 MHz bands for the next-generation service.


Reliance Industries NSE -3.72 % chairman Mukesh Ambani said in mid-July that Jio has developed its own 5G technology, which will be ready for trials as soon as 5G spectrum is available.


Telecom operators in India have also applied for spectrum for 5G trials, which have been long delayed. Airtel and Vodafone Idea have applied to partner with Huawei, ZTE, Ericsson and Nokia for the trials, while Jio first proposed a tie-up with Samsung and then decided to go solo.


These tie-ups would change if Chinese companies aren’t allowed to participate in the trials.


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