India telecom revenue to slow through March 2021; 5G spectrum auction delayed yet again

Revenue and profit growth at Indian telecom operators during the financial year ending March 2021 will slow due to lower data growth and weaker economic activity amid the coronavirus pandemic, according to Fitch Ratings.

Mobile service EBITDA will increase by about 15 percent in fiscal 2021 from 25 percent in fiscal 2020, as the industry will realise the full-year benefit of industry-wide tariff hikes of around 30 percent, effective from December 2019.

India telecom operators’ Q4FY2020 EBITDA growth was driven by tariff hikes and 4G data growth, which will decelerate in FY2021, as lockdowns were only implemented from 24 March 2020, Fitch Ratings reported.

Market leader, Reliance Jio, a subsidiary of Reliance Industries Ltd, reported sequential revenue and EBITDA growth of 6% and 11%, respectively, as ARPU growth was less pronounced, at 2%, to INR 131. This was due to the significant proportion of Jio’s customers being on long-tenor plans, on which tariff hikes will be implemented only in 1QFY21. In addition, sale of incremental Jiophones led to slower growth in ARPU. Its monthly data and voice usage per user was at 11.3GB and 771 minutes, respectively. Jio continued to gain market share at the expense of India’s third-largest telco, Vodafone-Idea Limited, as it added 18 million subscribers to reach a customer base of 388 million, the industry’s highest. We expect Jio’s FY21 mobile revenue to increase by at least 20%, led by higher monthly ARPU of INR147 and subscriber additions of 30 million (FY20: 80 million).

Bharti Airtel’s Indian mobile segment’s EBITDA will improve by 15-20 percent, on lower data growth, as smartphone sales are likely to drop significantly in 1HFY21 as feature-phone users are unable to upgrade to 4G smartphones during the lockdowns.

Airtel will be adding around 15 million new subscribers in fiscal 2021 as compared with the earlier prediction of 30 million, as users are unable to port their numbers during the lockdowns.

The pandemic-led economic slowdown will mostly affect lower-revenue users – those who spend INR 50-100 a month – which could prevent further improvements in monthly average revenue per user (ARPU), Fitch Ratings said.

Bharti Airtel management, headed by India CEO Gopal Vittal, is confident that the pandemic will have limited impact on FY21 EBITDA growth, which it forecasts to be at least 25 percent as compared with 25 percent in FY20, supported by ARPU growth to INR 170-175 a month.

Management says that data growth has increased by 20-25 percent in the short-term as users work from home and upgrade to higher-ARPU plans.

Airtel will generate small positive free cash flow in FY21, as Capex / revenue is likely to decline to around 26-27 percent on lower core Capex, interest costs and the government’s two-year moratorium on the payment of existing spectrum dues, which will defer about $840 million in each of FY21 and FY22.

Airtel has almost completed the shutdown of its 3G network across India and has redirected its 900MHz and 2100MHz spectrum for 4G usage. Telecom sector Capex peaked in 2019, as both Airtel and Jio front-laded Capex to expand 4G coverage and capacity and invested in fibre networks and in-building coverage.

Revenue market share is consolidating fast at Jio and Bharti, with Vodafone Idea rapidly losing market share. Vodafone Idea lost about 131 million subscribers in the last six quarters and is struggling to service its debt due to stagnant EBITDA generation, which is insufficient to cover its interest costs. The telco’s subscriber base is shrinking due to its deteriorating network on limited capex. Vodafone Idea has paid only USD 926 million in adjusted gross revenue dues, against the department’s demand of USD 6 billion, and has not yet reported its 4QFY2020 results.


5G Auction to be Delayed:

Fitch Ratings believes a 5G spectrum auction looks increasingly improbable in 2020 in light of incumbent telcos’ limited financial flexibility, a high base price of USD 7 billion for pan-India 5G spectrum in 3.3GHz-3.6GHz bandwidth and a limited business case for 5G, when 4G penetration is only around 50%. Bharti and Vodafone Idea have publicly stated that they will not participate in 5G auctions at such high prices.

A report in The Economic Times of India claims that the government will go ahead with the auction of additional 4G spectrum as planned, later this year but will defer the 5G spectrum sale until 2021.

Bharti Airtel and Vodafone Idea, who were both hit with multi-billion dollar AGR dues by the country’s Supreme Court last October, have both called for the auction to be delayed, as they battle to rein in expenses.

Sources familiar with the matter told journalists at The Economic Times of India that the country’s Digital Communications Commission had met on Monday to discuss postponing the 5G auction.

“Discussions are on to hold the 5G auctions later as some of the telcos need to buy spectrum but 5G may not be the priority now,” a source told the ET.


Light Reading reports that all the Indian telecom providers (including Reliance Jio, Airtel and Vodafone Idea) have asked the government to lower the high base price for 5G spectrum.  Airtel says it will not participate in the auction at the current reserve prices. The Department of Telecommunications has attached a base price of INR4.92 billion ($64.9 million) per MHz to spectrum in the 5G band.

Besides the negative effects of the COVID-19 pandemic, another possible reason for India postponing the sale of 5G spectrum is the deteriorating financial position of the telcos. That makes it unlikely the government would generate decent proceeds from the sale of 5G spectrum at this time. A recent court ruling about fees the telcos owe the government has further harmed their financial health, making it harder for them to participate in the auction.

Equally important is that the 5G ecosystem is far from developed. The lack of “use cases” [1.] for the new technology means telcos are unable to justify the high spectrum costs to investors. This was the main reason Vodafone Idea gave when it pushed for a reduction in fees.

Note 1.:  The important 5G use cases of Ultra High Reliability and Ultra Low Latency will not be realized anytime in 2021 as it is only 27% complete at this time in 3GPP Release 16.  You can’t implement something which hasn’t been specified yet!


India to Miss “5G Bus”:

Muntazir Abbas wrote in a May 23rd ETTelecom post:
India is set to miss the ‘5G bus‘ following the lack of preparedness, unavailability of sufficient spectrum, absence of encouraging use cases, and uncertainty around radiowaves sale for the next generation of telecom services.

“The Department of Telecommunications (DoT) is yet to form relevant study groups and revise the National Frequency Allocation Plan (NFAP) 2018 to include more bands including mmWave frequencies as a part of 5G roadmap,” an industry executive aware of the developments said.

In the past, Prime Minister Narendra Modi-led government maintained that it “won’t afford to miss 5G bus” like in the case of 2G, 3G, and 4G technologies that were deployed in India way later than many countries.

The executive further said that the quantum of spectrum availability in the 3300 – 3600 Mhz range also remains uncertain, while the department has not sought views on 26 GHz from the regulator despite agreeing to its viability for the commercial launch of fifth-generation or 5G networks.

The India government-backed high-level 5G Forum headed by the Stanford University Professor Emeritus AJ Paulraj anticipated the first 5G commercial launch by 2020, while suggesting that most guidelines on regulatory matters be promulgated by March 2019 to facilitate early 5G deployment.  That will clearly not happen!

India government authorities have yet to decide whether the 5G market is open to Chinese vendors Huawei and ZTE. Huawei has been banned from several countries, including Australia and the U.S,, over security concerns. Initially, Chinese vendors were not invited to participate in India’s 5G trials, although this was later changed. Now, India’s government is under immense pressure from the US to ban Huawei.

The current backlash against China over coronavirus, which originated in the Chinese city of Wuhan, makes the decision even harder for India’s government. That lack of clarity may have been the main factor in the postponement of the 5G auction, said Gagandeep Kaur, contributing editor to Light Reading



6 thoughts on “India telecom revenue to slow through March 2021; 5G spectrum auction delayed yet again

  1. Value of 5G in India higher than advanced countries: Cisco Asia chief
    “The value of 5G in India, in many ways, is higher than in advanced countries as it enables India to jump straight to smart infrastructure, and that comes at a lower cost but with faster delivery,” Cisco Asia president Miyuki Suzuki told ETTelecom.

  2. India telecom market leader Reliance Jio, second ranked Bharti Airtel and financially stressed Vodafone Idea (Vi) have filed applications for participation in the upcoming 4G spectrum auctions, due to start on March 1. The auction for over 2300 MHz of airwaves—valued at Rs 3.92 lakh crore at base price—though is likely to see limited bidding intensity for spectrum worth less than Rs 48,000 crore, with Jio and Airtel expected to be the main players. Industry executives have confirmed to ET that the three telcos have filed in their applications although Airtel, Jio and Vi did not respond to ET’s queries.

  3. India’s much delayed 5G trials could hit a fresh snag, with Bharti Airtel, Reliance Jio and Vodafone Idea (Vi) saying they don’t have any clarity on whether the coveted millimetre wave bands (26 GHz and 28 GHz) – allotted for trials – will be auctioned in the next spectrum sale.

    The telecom operators said they cannot spend time, effort and money to developing 5G use cases around these mmWave bands, unless the government commits to their commercial allotment at affordable rates as well. They called upon the Department of Telecommunications (DoT) to revise the National Frequency Allocation Plan (NFAP-2021) to include these vital mmWave band airwaves, which will give the carriers clarity before they start trials.

    SP Kochhar, director general of the Cellular Operators Association of India (COAI), told ET that “a reminder has just been sent to DoT that the revised NFAP has still not been finalised by its Wireless Planning & Coordination wing even after various meetings of the working groups were held and inputs provided by all stakeholders”.

    The COAI represents Jio, Bharti Airtel, Vi and global network vendors such as Ericsson and Nokia.

    Bharti Airtel, Jio and Vi did not respond to ET’s queries till press time.

    Though DoT earlier this month allowed telcos to conduct 5G trials on multiple spectrum bands, including mmWaves, the latter does not find a place in the current NFAP.

    If mmWave bands do not figure in the revised NFAP-2021, industry executives said 5G deployment costs would jump manifold and make the ultra-fast wireless broadband service unaffordable to consumers in India. They said mmWave bands such as 26 GHz and 28 GHz offer lightning fast data rates above 2 Gbps and huge capacity, which are critical for running 5G use cases cost-effectively, and also since the bulk of the global 5G devices ecosystem is evolving around these bands.

    Telcos are being given experimental airwaves in mid-band (3.2-3.67 GHz), sub-GHz (700/800 MHz) and mmWave bands (26-28 GHz) to run 5G trials for six months. So far, only mid-band spectrum in the 3.3-3.6 GHz bands has been earmarked by the government for 5G services.
    Read also

    Government OKs 13 applications for 5G trials; Chinese vendors kept out

    India’s decision allowing 5G trials without Chinese companies a sovereign one: US

    “Only after mmWaves are included in the revised NFAP, can DoT give a reference to Trai (Telecom Regulatory Authority of India) to examine and start fresh consultations on all bands identified for 5G, relook at their pricing and make fresh recommendations for the next auction,” said a senior industry executive, who did not wish to be identified.

    Unless this happens soon, the next auction could get pushed back by another 12-18 months, said the executive, and telcos will not see any business case in investing heavily in 5G network trials and developing India-relevant use cases, especially if there is no certainty around the commercial availability of crucial mmWave 5G spectrum.

    The revised NFAP-2021 will outline available airwave bands and services for which they can be used, including mobile broadband communications, defence, satellite operations under the Department of Space and also to meet the needs of the aviation, information and broadcasting, railways and home ministries.

    “It’s essential the revised NFAP document is finalised and issued at the earliest by DoT as it will earmark spectrum for various usages in the country,” said Kochhar.

  4. SpaceX to focus on 10 rural Lok Sabha constituencies for 80% of Starlink terminals shipped to India

    SpaceX will shortly apply to the Indian government for a licence to launch its Starlink satellite broadband services in the country and is aiming to touch 200,000 active terminals by December 2022.

  5. India’s telecom services providers have via the industry body COAI expressed disappointment with TRAI’s recommendations for auction of 5G spectrum bands.

    In a strongly worded reaction, COAI called the recommendation a “step backwards” than forward towards building a digitally connected India.

    COAI maintained that the spectrum pricing recommended by TRAI was too high, and noted that throughout the consultation process, the industry had presented extensive arguments based on global research and benchmarks, for significant reduction in spectrum prices. “Industry recommended 90% lower price, and to see only about 35-40% reduction recommended in prices, therefore is deeply disappointing,” it said.

    It added that charging a 1.5x price for spectrum for a 30-year period will nullify the relief provided by the Union Cabinet in 2021. The industry body pointed out that by introducing mandatory rollout obligations for 5G networks without factoring the huge cost of such a rollout, TRAI has “delinked itself from reality and is running counter to the Government’s efforts of enhancing ease of doing business”.

    On allowing private captive networks for enterprises, COAI argued that TRAI was dramatically altering the industry dynamics and hurting the financial health of the industry rather than improving it. Private networks would be a disincentive for the telecom industry to invest in networks and continue paying high levies and taxes, it contended.


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