Convergence Plus
Policy & Regulation
Saturday, September 19, 2020
AGR verdict brings certainty; DoT should now focus on ease of business: BIF

Pre-Bookings open for Samsung Galaxy S20, S20+, and S20 UltraThe AGR verdict will allow companies to move ahead with certainty on business plans, and the DoT must now focus on steps to make the telecom sector profitable and attractive to investors through ease of business measures and lowering “onerous” duties and levies, industry think tank Broadband India Forum (BIF) has said.

BIF has also urged the Department of Telecom (DoT) to take quick decisions on a spate of recommendations which have already been forwarded by the sector regulator including major ones like public Wi-Fi networks for broadband proliferation.

BIF said any delay in decision-making on TRAI’s recommendations comes at an “enormous economic cost” at a time when the country has set its sights on massive digital transformation.

Focus on profitability

The Adjusted Gross Revenue (AGR) verdict has brought in finality to the statutory dues issue, and the industry can now move on with business plans, BIF President TV Ramachandran told PTI.

“Government must see how they can make the industry more profitable and attractive to investors. Ultimately, if you want investments to come into the country, you have to make the business case attractive,” Ramachandran added. The immediate focus must be on ease of doing telecom business, and reduction of “onerous duties and levies”, which are amongst the highest, he said.

Earlier this month, the Supreme Court allowed telecom operators to pay 10 per cent of total AGR-related dues this year, and rest of the payments in 10 instalments starting from next fiscal year. Implement recommendations

Ramachandran further said many of the Telecom Regulatory Authority of India (TRAI) recommendations that have already been forwarded to DoT but remain in a limbo, now need to be pushed actively, while the provisions of already-notified National Digital Communications Policy (NDCP) must be operationalised and implemented, at the earliest.

TRAI recommendations that could be very useful once implemented, include reduction in licence fee, USO (Universal Service Obligation) levy and spectrum usage charges, proliferation of broadband through public Wi-Fi networks and enhancement of scope of Infrastructure Providers Category-I (IP-I) registration, said BIF.

Besides, recommendations on captive VSAT CUG (Very Small Aperture Terminal - closed users group) policy issues, suggestions on ease of doing telecom business, spectrum usage charges(SUC) and presumptive-AGR for internet providers and commercial VSAT service providers, would also be helpful, it said.

Other key recommendations pertain to making ICT (Information and Communications Technology) accessible for persons with disabilities; next-generation Public Protection and Disaster Relief communication networks; spectrum, roaming and service quality related requirements in machine-to-machine communications; definition of revenue base (AGR) for the reckoning of licence fee and SUC, and reduction in the rate of GST imposed on the telecom sector. (Source: The Hindu Businessline)

Big booster: Govt panel clears $100-billion mobile export proposals from global manufacturers

Airtel, Vodafone Idea, Tata Tele likely to pay AGR dues on Monday: DoT source Applications by iPhone contract makers Foxconn, Pegatron and Wistron as well as Samsung, Karbonn, Lava and Dixon to export mobile phones worth around $100 billion from India have been cleared by the empowered group, said people with knowledge of the matter.

“The empowered committee has approved all applications estimated to export around $100 billion (Rs 7.3 lakh crore) worth mobile phones under the production linked incentive scheme (PLI) and all the applications will be placed before the cabinet probably this week,” a senior government official told ET.

Members of the empowered committee include the Niti Aayog CEO along with the secretaries of economic affairs, expenditure, revenue, the Ministry of Electronics and Information Technology (MeitY), Department for Promotion of Industry and Internal Trade (DPIIT) and Directorate General of Foreign Trade (DGFT). Five of the applicants are overseas ones, seven are Indian and another six are in the components manufacturing scheme, officials said.

Apple’s contract manufacturers and Samsung have submitted production estimates of phones worth $50 billion each in the next five years, according to the applications, said people with knowledge of the matter. Exports will be slightly lower in each case.

Scheme was Notified in April
“The extraordinary response to the PLI shows enormous trust of the global community in India’s manufacturing capability and leadership of Prime Minister Narendra Modi,” Communications & IT minister Ravi Shankar Prasad told ET.

The PLI scheme, which aims to make India a manufacturing hub for smartphones, was notified in April. Apple’s contract manufacturers started producing its latest handset models, the iPhone 11 and iPhone SE, shortly after that in India. The scheme is aimed at attracting manufacturers looking to move out of China amid Sino-US trade tensions, and even looks to draw companies from manufacturing hubs such as Vietnam. While Foxconn and Wistron already have plants running in India, Pegatron — Apple's second-largest contract manufacturer — is looking to set up its factory and is talking to states such as Uttar Pradesh, Tamil Nadu, Karnataka and Andhra Pradesh.

Meanwhile, Samsung, which now exports phones worth about $2.5 billion from India, is all set to ramp up its production to handsets worth $50 billion in the next five years. Of this, $40 billion will comprise devices with a factory price of more than $200.

“Samsung exporting $2.5 billion out of India — of this, 97% was in the below $200 segment. By putting this floor price of $200 for eligibility in the PLI scheme, we have incentivised them to make high-value phones in the country and now they will be vacating this space of less than Rs 15,000 factory price for Indian players to occupy,” said the first official cited above. “This is an important stage as it will ensure that Indian players are able to climb up the learning curve and start making world-class smartphones to compete globally.”

The five global applicants are Samsung, two units of Foxconn, Wistron and Pegatron. The domestic ones are Lava, Dixon, Micromax, Padget Electronics, Sojo, Karbonn and Optiemus. According to government data, 22 companies had applied for the Rs 41,000-crore PLI scheme. (Source: Economic Times)

TRAI notifies changes to telecom interconnection rules for fixed line networks

HealthifyMe Telecom regulator TRAI on Friday notified certain changes to the telecom interconnection rules, paving the way for easier interconnectivity between any two fixed line networks and between fixed line and national long distance (NLD) networks.

Telecom regulator TRAI on Friday notified certain changes to the telecom interconnection rules, paving the way for easier interconnectivity between any two fixed line networks and between fixed line and national long distance (NLD) networks. An industry observer said that TRAI's 'Telecommunication Interconnection (Second Amendment) Regulations 2020' will bring procedural clarity and convenience for fixed line operators, and also address areas like closure of interconnect points in event of service discontinuation within a short-distance charging area.

Outlining the amendments, TRAI said that within a service area, the location of points of interconnect for call between any two fixed line networks and fixed line and NLD networks will be at a place that is mutually agreed to between the interconnection provider and seeker.

The term 'interconnection' refers to commercial and technical arrangements under which telecom service providers connect their equipment, networks, and services to enable their customers to have access to subscribers of other operators' network.

If the two sides fail to come to an agreement, the location of point of interconnect (PoI) for such networks will be Long Distance Charging Centre (LDCC), the Telecom Regulatory Authority of India (TRAI) said in a statement.

"In such a case, the carriage charge for carriage of calls from LDCC to SDCC (Short Distance Charging Centres) and vice versa, as applicable, shall be paid by the interconnection seeker to the interconnection provider," it added.

It said that existing call connect points between two fixed line networks or fixed line and NLD networks will remain in operation for a period of minimum five years or till such time the interconnected service providers mutually decide to close such points, whichever is earlier.

"The existing PoI at the SDCC level, for calls between PSTN (Public Switched Telephone Network) and PSTN or between PSTN and NLD network can be closed if the services of either of the interconnected service providers are discontinued in that SDCA (Short-Distance Charging Area)," TRAI said. (Source: ETTelecom)

Review of telecom gear source code highly questionable: Ericsson to India

Airtel, Vodafone Idea, Tata Tele likely to pay AGR dues on Monday: DoT source A network can be compromised through weaknesses in deployment or configuration and operations, which software-related tests are not aimed to address, said Ericsson CTO.

Swedish telecom equipment maker Ericsson told the Indian government that the outcome of source code review would be questionable and it was virtually not possible to bring out the software free from known vulnerabilities.

In a two-page letter to Secretary of the Department of Telecommunications (DoT), dated June 11, seen by ETTelecom, Ericsson's Chief Technology Officer (CTO), Erik Ekudden said, "it is highly questionable if a review of the source code is meaningful, depending on the purpose," and added that if the purpose was to verify the supplier’s software, it would be virtually an impossible task.

Stockholm-based executive further said that it was in fact virtually not possible to produce software that is free of all known vulnerabilities. "A network can be compromised through weaknesses in deployment or configuration and operations, which software-related tests are not aimed to address," Ekudden added.

The letter from multinational telecom giant has come on the back of India's much-anticipated move seeking source code of every network equipment deployed in the country as a part of the security assurance testing initiative.

"Certifying software or hardware does not mean it is flawless. Un-noticed imperfections of testing lead to a false sense of security," the top executive said.

“Certifying software or hardware does not mean it is flawless. Un-noticed imperfections of testing lead to a false sense of security.Erik Ekudden, Ericsson Global CTO”

Query to Ericsson did not elicit any response.

Citing disadvantages, Ekudden said that scanning source code requires Ericsson specific and domain-specific knowledge and understanding, and added that a meaningful review would take substantial time and effort and could be best performed by a team that has a good and thorough knowledge of the specific source code.

Meanwhile, the Cellular Operators Association of India (COAI) that represents incumbent telcos such as Bharti Airtel and Reliance Jio, has maintained that the source code was never sought by the telecom department's security testing arm in the past. "This source code requirement has come up recently in the last two months. The discussions with DoT on Indian Telecom Security Assurance requirements (ITSAR) have been ongoing for over a year and the requirement to submit the source code was never raised earlier by the security testing team of the department," the group told DoT.

Last year, the United Kingdom had set up a test centre in order to screen source codes aimed to protect next-generation telecom networks following backdoor concerns surrounding Chinese gear maker Huawei Technologies.

However, the India unit of Chinese firm said that it was open to providing source code to the Indian authorities after a similar proposal was made by the company's founder Ren Zhengfei to a potential US-based company for manufacturing and deployments. The current best practice in the industry is to conduct comprehensive risk assessments based on the categorisation of the severity of potential security vulnerabilities, the Swedish company said, and believes that any critical security vulnerabilities that might compromise customers’ networks could be addressed before releasing any commercial software.

Last year, the Steering Committee chairman of India's high-level 5G panel A. Paulraj said that the telecom network technology from European gear makers may be as unsafe, or safe, as their Chinese rivals, including Huawei, and that only locally-produced technology can ensure complete infrastructure safety.

India's telecom equipment market is dominated by Finnish Nokia, Swedish Ericsson and Chinese Huawei.

In 2010, a similar security condition was initially imposed on multinational original equipment makers but later it was relaxed after the industry-wide consultation. (Source: ETTelecom)

Non immigrant like H1B visa pivotal to Post Covid 19 recovery: US tech giants to Trump

Airtel, Vodafone Idea, Tata Tele likely to pay AGR dues on Monday: DoT source The Wall Street Journal reported late last week that the US government is considering suspending a number of employment visas including the H-1B, in view of the massive unemployment in America due to the coronavirus pandemic. Indians are the largest beneficiaries of H-1B visas, receiving about two-thirds of the 85,000 new visas issued each

Technology giants Google, Facebook, Amazon, IBM and Accenture are among those petitioning the Trump administration for a continuation of visa regimes that allow them to hire highly- skilled immigrants as they will be pivotal to America’s economic recovery in a post-Covid world.

Washington-based advocacy ITI, which counts these companies and others as its members said it is "concerned" that the Donald Trump administration is contemplating suspending or restricting -- non-immigrant work visas including the much sought after H1-B visa, in a letter addressed to the US president last week.

“As the recent jobs report highlights, firms are anxious to get their employees back to work and the labour market is showing promising movement. The technology industry, including our foreign-born workers, are vital to sustaining these recovery trends,” Jason Oxman, President and CEO of ITI wrote.

Separately, the US Chamber of Commerce CEO Tom Donohue has also written to the US government pointing out that as the economy rebounds, American businesses will need assurances that they will be able to meet all their workforce needs.

US-India Business Council told ET that it endorses the letter sent by Donohue. HCL Technologies CEO C Vijayakumar and Citi India CEO Ashu Khullar along with Bharat Forge Deputy MD Amit Kalyani are among the global board of directors of the US-India Business Council.

“An analysis of Bureau of Labour Statistics data in May 2020 showed that unemployment in computer-related occupations decreased in April 2020 to 2.8 percent from 3.0 percent in January 2020,” Oxman of ITI said in his letter.

The Wall Street Journal reported late last week that the US government is considering suspending a number of employment visas including the H-1B, in view of the massive unemployment in America due to the coronavirus pandemic. Indians are the largest beneficiaries of H-1B visas, receiving about two-thirds of the 85,000 new visas issued each year.

US firms including the likes of Google, Microsoft, Amazon and Facebook have been the key beneficiaries of the H-1B visa in recent years with seven of the top 10 in fiscal 19 being US headquartered tech firms

“If companies cannot hire new H-1B workers or continue to employ their current H-1B workers, innovation and productivity growth, particularly that which is achieved through patent production, would suffer greatly to the detriment of our overall economy,” Donohue wrote in his letter to the US President

He added that short-term disruptions in the L-1 and H-1B visa programs would hamper businesses’ ability to plan for the long-term

Imposing burdensome new regulatory requirements on businesses that employ foreign nationals would undermine that access to talent, and, “in the process, undercut our economy’s ability to grow and create jobs,” Donohue wrote.

In addition to the H-1B visas, the suspension could apply to the H-2B visa for short-term seasonal workers, the J-1 visa for short-term workers including camp counselors and au pairs and the L-1 visa for internal company transfers.

"The administration is currently evaluating a wide range of options, formulated by career experts, to protect American workers and job seekers especially disadvantaged and underserved citizens - but no decisions of any kind have been made," White House spokesman Hogan Gidley had said in a statement.

Technology industry groupings point out that even during the pandemic, in May 2020, nationwide in the US, one in four highly-skilled tech workers across sectors were immigrants.

Arguing that the technology industry, including foreign-born employees, is enabling many Americans to continue to work remotely during the COVID-19 pandemic, ITI’s Oxman said the sector is playing an essential role. More so, as it enables the U.S. economy to move activities online and maintain vital digital infrastructure to keep businesses running securely and people connected. (Source: Economic Times)

TRAI issues clarification, says it has not recommended an 11-digit numbering scheme for mobile services

Pre-Bookings open for Samsung Galaxy S20, S20+, and S20 UltraThe Telecom Regulatory Authority of India (TRAI) on Sunday issued a clarification stating that it had not recommended having 11-digit mobile numbers, but only adding a ‘0’ as a prefix when a mobile number is dialled from a landline.

“Trai has not recommended 11-digit numbering scheme for mobile services,” the Telecom regulator said in a statement.

It further said that it had “categorically rejected” having an 11-digit mobile number. The statement follows media reports stating that the regulator had suggested having 11-digit mobile numbers as part of its ‘Recommendations on Ensuring Adequate Numbering Resources for Fixed Line and Mobile Services’ report.

“Presently, inter-service area mobile calls from basic/fixed phone can be accessed with a dialling prefix ‘0’. However, mobile phones are accessed from a fixed-line phone, within a service area, without dialling prefix ‘0’.

This puts the limitation that any digit which has been used as a first digit for fixed network (for local calls) cannot be used for mobile numbers. By making it mandatory to access mobile numbers in a service area from fixed network by dialling prefix ‘0’, all the free sub-levels in levels ‘2’,’3’,’4’, and ‘6’, can also be used for mobile numbers,” the report said.

This can help generate an additional 2,544 million numbering resources for mobile services to cater to future requirements as per TRAI. “The introduction of a dialling prefix for a particular type of call is not akin to increasing the number of digits in the telephone number,” TRAI clarified.

It further added that a prefix is mandatory for SDCA (Short Distance Charging Area) calls and while making a call form mobile number to fixed landline stating that it had only suggested “minor changes” in the dialling pattern. (Source: The Hindu Businessline)

Restrict e-commerce only to essentials, urge mobile retailers

Airtel, Vodafone Idea, Tata Tele likely to pay AGR dues on Monday: DoT source Appeal Southern States to bar them from selling phones, TVs. As the Centre has included e-commerce in the list of activities that are exempted from the lockdown from April 20, the regional mobile phone retailers have appealed to the State Governments in the South not to allow sales of phones or TVs, which are not considered essential services.

In letters to the Governments of Tamil Nadu, Telangana and Andhra Pradesh and Karnataka, the South India Mobile Retailers Association have argued that the guidelines issued by the Home Ministry are being misinterpreted by certain players and they are preparing to sell smart phones and TVs through the e-commerce route.

In its letter to Telangana Industries and Information and Technology Minister K T Rama Rao, the association cautioned that allowing e-commerce players to deliver phones during the lockdown period could pose health challenges.

“There are no standards being followed at the warehouses of these online partners. There are no SOPs (standard operating procedures) given to their delivery boys on hygiene,” the association said.

Citing the example of a Delhi Pizza delivery boy who reportedly exposed 70 persons to Covid-19, the material used and the personnel who will deliver the products may spread the infection in the absence of safety measures.

“There is a huge shortage of manpower during this pandemic and if resources are allocated for supplying these commercial products, it will create a manpower crunch for supplying the essential items like food and groceries,” it said.

The association in its memorandum further appealed to confine e-commerce operations only to essential commodities delivery and bar them selling phones and TVs, (The Hindu Businessline)

Startups Demand Liquidity Lifeline to Stay Afloat

Pre-Bookings open for Samsung Galaxy S20, S20+, and S20 UltraIndustry writes to FM seeking loans free of interest or linked to tax, GST refunds. India’s startups are lobbying the government for a lifeline as they cope with an existential liquidity crisis amid a disruption of their ecosystem due to Covid-19, the national lockdown and a spiraling global market. Half of them may be forced to close if no support is forthcoming, according to one of the letters sent to the finance minister.

Startups sought loans free of interest or linked to income tax and goods and service tax (GST) refunds to meet funding needs in a March 30 letter to finance minister Nirmala Sitharaman signed by the Confederation of Indian Industry, Nasscom, Indian Private Equity and Venture Capital Association as well as leading entrepreneurs and venture capital investors. Among the 75 signatories are Kris Gopalakrishnan, Rajan Anandan, TV Mohandas Pai, Arihant Patni and Mukesh Bansal.

The startups want public sector banks and state-controlled Small Industries Development Bank of India (Sidbi), the implementing agency of the ₹10,000 crore Fund-of-Funds, to offer loans up to the full extent of the refunds they’re due.

“These refunds are undisputed… but are yet to get transferred to the startups due to various reasons,” said Siddarth Pai, founding partner of 3one4 Capital and a signatory to the March 30 joint letter.

Funding into Cos as CSR

“While these are assets on the balance sheet of the startups, what’s needed now is the translation of this to cash,” said the letter.

This will provide startups with liquidity for the near-to-short-term without stressing government resources, the note said.

“Covid crisis threatens to destroy all of the progress and future potential of our startup ecosystem in a few short months,” the letter stated. “We seek your urgent intervention to help ensure India’s startup ecosystem survives... We need the startup ecosystem to survive in order to help the economy bounce back.”

Another communication from LocalCircles, an online community platform that represents 29,000 startups and small and medium enterprises (SMEs), to the finance minster said “startups want that some or all of CSR (corporate social responsibility) funds be permitted into startups as grants”.

Companies should be allowed to invest in startups and avail CSR benefits and claim it’s CSR, the letter said. “The startup and SME community is hopeful that the government will consider these asks with the highest importance,” said the March 31 LocalCircles note. “It is critical for startups and SMEs to survive… and if nothing is done, at least 50% of them will soon be shut.” ET has seen both the letters.

VC FIRMS’ CAVEAT

Venture capital firms have issued warnings to portfolio companies and the broader ecosystem to conserve cash and tighten spending, given the worsening macroeconomic climate and meltdown of global indices. Ecommerce and food delivery unicorn startups have been struggling because of the lockdown. Some of the top startups in the country are reported to have started cutting staff costs.

“The government’s focus rightfully seems to be on health and like in the past it will come to the rescue of the startup ecosystem soon,” said Sanjay Mehta, founder, 100X. “Also, the corporate venture capitalist as an asset class has gone away due to the current situation, and any access to fresh capital in small businesses will be the only way growth will come.”

Multiple ongoing deals talks have been shelved or put on hold citing force majeure, threatening companies that don’t have adequate funding to last out the crisis, ET has reported. ( Source: Economic Times)

Coronavirus: Nasscom seeks easing of Work From Home norms as Covid-19 cases surge

Pre-Bookings open for Samsung Galaxy S20, S20+, and S20 UltraAs the number of Covid-19 cases in India surges, the IT industry’s apex body Nasscom has sought easing of regulatory restrictions for a month to enable Work From Home (WFH) for the sector. Under the prevailing other service providers (OSP) regime, IT and ITeS firms require multiple levels of compliance -- ranging from technical to high-security deposits -- for WFH. This the main impediment before the WFH culture in the country.

The Covid-19 outbreak in India has forced the industry to look at ensuring business continuity. Industry players have also echoed a similar sentiment and believe that there must be cognisance in providing WFH to employees under the OSP regime, Nasscom said in a letter to Telecom Minister Ravi Shankar Prasad.

Indian IT-ITeS companies are evaluating several options to ensure business remains up and running and one such option is to offer WFH to their employees to minimise any threat to people and business. Today, it is possible for employees to work from anywhere in the world, while remaining within the ambit of organisational information and data access protocols, and organisational security practices, the letter written by Nasscom President Debjani Ghosh said.

Accordingly, keeping in mind the current situation and in the interest of public health and the safety of people employed in the technology industry, Nasscom has sought urgent intervention to waive requirements pertaining to WFH under the OSP regime for one month, as an “interim emergency measure”. The move is important as despite the availability of technology, companies under the OSP regime continue to struggle in operationalising WFH for their employees due to the “onerous” compliance and technical requirements under the prevailing regime. These include setting up Provider Provisioned Virtual Private Networks (PPVPN) connectivity, sharing pre-defined locations of extended agents (employees) and providing “high” monetary security deposits among others.

Last year, licensor Telecom Regulatory Authority of India (TRAI) had conducted extensive consultation on an other service providers regime and recommended the need to remove restrictions. However, DoT is yet to take these into consideration, it said.

“At a time when the world is looking for the cure of Covid-19, it is essential for technology companies to be able to support global efforts by ensuring adequate uptime, and thereby support initiatives that have the potential for saving thousands of lives around the world,” the letter added. (Source: The Hindu Businessline)

Wi-Fi on Flights Allowed, Govt Notifies New Rules

Airtel, Vodafone Idea, Tata Tele likely to pay AGR dues on Monday: DoT source Pilot-in-command may permit access; gadget to be used in flight mode. Wi-Fi on flights will now be allowed in India for internet services upon permission from the pilotin-command and the gadget is to be used in flight mode, with the government finally notifying rules for this.

The amended aircraft rules have been published by the government in the official gazette on Saturday and they skip the mention of allowing mobile communication, which was mentioned in the draft rules published by the government on August 14 last year.

“The pilot-in-command may permit the access of internet services by passengers on board an aircraft through Wi-Fi on board when laptop, smartphone, tablet, smartwatch, e-reader or a point of sale device is used in flight mode or airplane mode. Provided that the director general shall certify the aircraft for usage of internet in flight through Wi-Fi on board subject to procedures as specified in this behalf,” the latest notification now says. ET has a copy of the notification.

The final rules notified on Saturday say the pilot-incommand may permit the use of cellular telephones by passengers of a flight “after the aircraft has landed and cleared active runway, except when the landing takes place in low visibility conditions as may be determined by the director general.” An additional explanation has been added in the new rules saying an aircraft shall be deemed to be in flight when all its external doors are closed following embarkation until the moment when any such door is opened for disembarkation.

The government in its latest notification has also said that it received no objections or suggestions from the public in respect of the draft rules.(Source: The Economic Times)

AIRWAVES AUCTION MAY GENERATE ₹35,000-40,000 CR

Spectrum Sale may Fetch only ₹10kcr Initial Payment. Voda Idea, Bharti Airtel may give 5G spectrum a miss at current price but Jio may buy some

The government may generate upfront payments of only around ₹10,000 crore from spectrum auctions in the next fiscal year starting April 1, given the financial challenges faced by two major telcos Vodafone Idea and Bharti Airtel, telecom department officials have estimated.

This implies that the next spectrum sale could fetch it only around ₹35,000-40,000 crore overall as against the ₹5.86 lakh crore worth of airwaves that the government wants to put on sale at base price, experts said.

Telcos pay upfront 25% for the sub-1 GHz band and 50% for higher bands they win in auctions. The balance is paid over 16 years in equal instalments.

Senior officials told ET that loss-making mobile phone operators Vodafone Idea and Bharti Airtel — facing a combined ₹89,000 crore in new statutory dues — are expected to give the 5G spectrum a miss in the upcoming sale planned in March-April.

Airtel, though, is likely to pick up some 4G airwaves, especially in eight circles where its permits are expiring.

“Of the three players, Jio may take some 5G spectrum but not much, besides some 4G. We expect it will do so to get the firstmover advantage,” said a government official, who did not want to be named.

Loss-making Vodafone Idea, facing a survival threat and in the midst of a costly integration process, is expected to largely give the auctions a miss, officials said.

Spectrum Renewal Hopes

This means without the adjusted gross revenue dues, the government will fall way short of its ₹1.33 lakh crore budgeted for the next fiscal year, with only ₹20,000-25,000 crore expected to come from licence fees and spectrum usage charge.

Airwaves across the 4G bands of 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2100 MHz, 2300 MHz and 2500 MHz, besides 5G spectrum in the 3300-3600 MHz bands, will be offered to Vodafone Idea, Bharti Airtel and Reliance Jio.

The auction, expected in the first quarter of the next fiscal year, will see some 8,293.95 MHz of airwaves at an estimated total base price of ₹5.86 lakh crore.

These numbers, however, look very optimistic.

‘UNREALISTIC PRICING’

“The government planning an auction is commendable, however, given the reserved prices for the most sought-after bands and the present financial condition of the industry, we do not believe the government will be able to garner any more than ₹6,000-7,000 crore as upfront payment,” said Rajan Mathews, director-general of the Cellular Operators Association of India (COAI), which represents all private telcos.

“This is not to negate the fact that there are tremendous opportunities in India, but what is getting in the way is the unrealistic pricing of the key spectrum bands that are for 5G, and the 700 MHz band,” Mathews added.

The government had cleared a base price for 5G airwaves at ₹492 crore per MHz and proposed the sale of a minimum 20 MHz blocks, which would mean a telco would have to spend close to ₹50,000 crore for 100 MHz — the quantum it needs to offer quality 5G services. For the 700 MHz band, which was unsold at the previous auction, the DoT has cut the base price by 43% to ₹6,568 crore a unit, or ₹32,840 crore for a block of 5 MHz.

Telcos have described the rates as expensive.

Earlier this week, Bharti Airtel CEO Gopal Vittal reiterated in an earnings call that the 5G airwaves were priced too high. “…we will not pick it up at those prices”, he said.

Previously, Vodafone Idea and Reliance Jio had termed the 5G base prices as too expensive.

“At the stage that we are in and where there is tremendous pressure based on their financial health, the upcoming auctions are expected to be muted,” said Prashant Singhal, global technology, media and telecommunications (emerging markets) leader at EY.

SPECTRUM RENEWAL

All hopes are pinned on spectrum renewal.

“The best case for the government is to realise value from spectrum renewals from the incumbents, and this may help the government raise ₹25,000 crore at most, of which Rs 10,000 crore may accrue in FY21. Over and above this has to be 5G spectrum auction, which seems very unlikely given the ecosystem and spectrum pricing,” said Rajiv Sharma, head of research at SBICap Securities.

If there is a 50% reduction in current 5G prices, then there may be some interest for 3,500 MHz and another ₹20,000 crore could be raised in the fiscal year starting April 1, 2021, he said.

“So, to sum up, spectrum auction is not going to be more than ₹35,000 crore,” Sharma said.

Already weighed down by debt of over ₹7 lakh crore, loss-making telcos Bharti Airtel and Vodafone Idea are now facing over ₹35,000 crore and ₹53,000 crore, respectively, in adjusted gross revenue dues after a Supreme Court order last October.

Both have filed a plea in the top court to be allowed to negotiate with the DoT on longer timelines and modalities for payment, in a bid to soften the financial blow. The court has yet to hear the matter. (Source: Economic Times)

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