It will take industry at least five years to realize returns on 5G investments: COAI
It will take industry at least five years to realize returns on 5G investments: COAI
The Cellular Operators Association of India advocates a “significant” cut in 5G spectrum prices recommended by sectoral regulator TRAI to ensure a “viable business model”. The association pointed out that it would take at least five years for the telecoms industry to start reaping profits from the huge investments that would flow into the rollout of 5G.
“Prices for 5G spectrum are driven by supply and demand and at this time there really is no viable business case for 5G, not just in India but globally,” said COAI Director General SP Kochhar.
He pointed out that self-developed countries where 5G was rolled out expected maximum revenue from enterprise customers. However, this has not happened and only about 10-15% of the revenue comes from companies in countries where there are industrial applications that can use 5G. “Therefore, the revenue streams are not as large as expected,” he said.
Mr Kochhar said India is a very price sensitive market and the ecosystem for 5G is not there yet. “So which industry will bring revenue for 5G? It will happen, but it will take time. So until then we have to invest huge sums in frequencies, in radios and in networks… with profits that may start to show up in 5-6 years. So it’s a dead investment for those five years… It should be a viable business case that we get spectrum at an affordable cost that won’t bankrupt us or let all our money go down the drain until the anticipated use case comes along, if it comes at all . That is why we are calling for a significant reduction in frequency costs,” he explained.
He stressed that the government will not lose in the overall game plan as it derives up to 4G revenue from spectrum and consumer tariff taxation. However, now all industries will bet on 5G, their production capacity and profit margins will increase, and therefore their contribution in the form of taxes to the treasury would increase massively, he stressed.
“If you don’t let that foundation of 5G build strongly, you lose that too. So if you just look at telecom operator revenue for 5G rollout, that’s tiny when you compare it to what you’ve got over a couple of years.” can be obtained from the industries that will benefit. That’s our argument.” he said.
Recently, Telecoms Minister Ashwini Vaishnaw said that by June 2022 everything was “more or less” on track for spectrum auctioning, including 5G ether, and that the government was confident of resolving the spectrum pricing issue with the industry.
In its recommendations, TRAI had proposed reducing the price of radio waves in various bands, including the 5G spectrum, by up to 35-40% from the base price previously proposed. However, the COAI, whose membership includes three private telecoms companies Bharti Airtel, Reliance Jio and Vodafone Idea, has expressed disappointment at the industry’s call for a 90% price cut.
In total, more than 1,00,000 MHz ether was recommended for auction. The full spectrum, offered at reserve price, is valued at approximately ₹5 lakh crore for 20 years.
