5G Auction Premium on 5th Generation services may boost Average Revenue Per User for the telecom companies, according to Nomura. With potentially higher speed on offer and likely initial uptake from premium customers, with smartphones above Rs 15,000, there is a potential for telcos to charge a premium for 5G as compared to 4G, Nomura said.
The 5G spectrum auction is underway and the government received bids to the tune of Rs 1.45 lakh crore on the first day (yesterday), according to Union Minister for Telecom Ashwini Vaishnaw.
In a report on the first day of auctions, brokerage firm Nomura said that the bids are around 1.5 times better than the government’s estimates of Rs 80,000 crore to Rs 1 lakh crore and set a new record, up from the previous high of Rs 1.09 lakh crore in the 2015 auction.Moreover, the report says that premium on the fifth generation services may boost Average Revenue Per User (ARPU) for telecom companies quite quickly. ARPU is a measure of realisation per subscriber and is a key monitorable metric for telecom companies.
The rationale for ARPU boost
The brokerage firm believes 5G tariff plans would be a key monitorable factor in the near term. Historically, Indian telcos have refrained from charging a premium for 4G plans as compared to 2G or 3G data plans.
However, with potentially higher speed on offer and likely initial uptake from premium customers, with smartphones above Rs 15,000, there is a potential for telcos to charge a premium for 5G as compared to 4G.
Boost for Jio
“The key surprise in the 5G spectrum auctions so far has been the bidding for the 700MHz band,” Nomura said.Based on the earnest money deposits, the only bidder for the pan-India 700 MHz band could be Reliance Jio. 700 MHz band could give an edge in terms of network quality, especially indoors, it added.
The Union Minister of Telecom has indicated that the 5G spectrum will be allocated by mid-August and people in the know say that the aim is to commence rollouts by August 15,
Background
There are four bidders were in the fray — Reliance Jio, Bharti Airtel, Vodafone Idea, and a private player, Adani Data. According to government officials, the mid and high bands — 3,300 MHz and 24 GHz — attracted the highest interest from the bidders, while the 720 MHz low band too received bids for the first time ever — this band had gone unsold in 2019 and 2021. Government sources said 40 percent of the 720 MHz band has been sold.
Nomura’s recommendation
The foreign brokerage firm has a ‘buy’ recommendation on shares of Bharti Airtel and Reliance Industries but says ‘reduce’ Vodafone Idea stock. Telcos have also selectively bid for spectrum in the legacy bands, 800-2500MHz, to either boost footprint or to renew the spectrum that is due to expire in 2024, the brokerage firm highlighted.
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9 thoughts on “5G spectrum auction may boost telcos revenue sooner than expected with Jio holding an edge”
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