To compete with Jio in the 5G market, Airtel can spend up to 40,000 rupees for the 700MHz spectrum: IIFL.
According to IIFL Securities, in order to maintain its long-term competitiveness and reduce the likelihood of these premium airwaves being contracted out to state-owned telecom companies, Bharti Airtel could spend Rs 400 billion to buy 5G spectrum in the 700MHz frequency band in the near future sale . The company also stated that while Airtel would not require extra low frequency (sub-GHz) spectrum for 5G services for the next two years, there is a risk that the government would allocate 700 MHz of bandwidth to PSUs, if it does not auction these frequencies in 2023.
However, the brokerage firm downplayed the economic impact of a temporary debt hike, stating that the operator has an opportunity to earn 75% of the proceeds from its Rs.210 billion rights issue, stable income market share (RMS) growth and average revenue per Users (ARPU) all should keep telecom company leverage in check.
In the first phase of its Rs 210 crore rights issue, Airtel has raised only Rs 52.47 crore so far; The balance can be collected whenever Telekom decides to start the two more calls. According to the IIFL, Airtel can refarm the 900 MHz frequency for 5G.
However, the telco’s significantly lower involvement in the low frequency bands compared to Reliance Jio may not be enough to support 5G, 4G and possibly 2G simultaneously. Therefore, the IIFL believes that the operator may eventually have to bid for a 700 MHz band. 4G should be used in the next few years.
After completing 5G spectrum auctions earlier this month, Reliance Jio and Airtel are both preparing to deploy 5G services. Jio, founded by Mukesh Ambani, spent almost 40,000 crores to get spectrum at a value more than double that of Airtel. Here we will find out why Mukesh Ambani invested so much in the 700MHz band and what he could do with it.
Reliance Jio and Airtel, two of India’s leading telecom companies, are looking to launch their 5G services now that they have passed.
Will Jio 5G beat Airtel 5G in speed and quality?
Jio’s 5G strategy combines coverage and high speeds as they are mutually exclusive. Imagine accessing a 5G network with slow speeds or a 5G network with high speeds where the signal is constantly dropping.
Jio has coverage in the 700MHz band, capacity in the 3.5GHz band, and speed in the 26GHz mmWave frequency. These bands work together to provide a national 5G organization that is both fast and reliable.
In order to be able to offer 5G services, Airtel is now dependent on acquiring mid-band licenses. The telco had enough bandwidth in the 3.3GHz band to get started, but experts believe it may need to buy bandwidth in the 700MHz band at some point. Sunil Mittal may have thrown the can on the street for now, but he’ll have to pick it up at some point.
Why did Jio buy 700MHz spectrum?
When it comes to coverage, the 700MHz spectrum is one of the best. Its range can be up to 8 to 10 kilometers from tower to tower. This provides excellent coverage and can be very helpful for quickly expanding range in rural and remote areas of the country. “We believe Jio is well positioned to build Independent (SA) 5G after gaining 700MHz. SA 5G has the advantage that the provider can deliver really low latency applications like slicing. Given the scarcity of bandwidth (telcos can roll this out on 4G channels), it’s difficult for their competitors to offer it, according to a study by BofA Securities.
The downside of the 700MHz band is that not all mobile phones in India currently support it. Therefore, Jio needs to work with smartphone manufacturers to build the ecosystem. “While 5G SA still has a long way to go in terms of devices, infrastructure and applications, Jio is better positioned than its competitors to offer unique services. According to the study, this could help the company lure high-end customers away from competitors, thereby raising the bar for high-end competition.
The history of the 700 MHz frequency band
The typically more expensive 700MHz range is said to offer superior network coverage due to its low frequency and ability to effectively penetrate buildings. This enables the network operators to provide better, more reliable and faster connections in densely populated city regions like Delhi, Mumbai, Kolkata etc.
Despite the high cost, it is cheaper for telcos to provide broadband access in the 700MHz spectrum than in the 2100MHz bands. Bands below 1000 MHz or in the sub-GHz range offer higher coverage with lower power consumption. In comparison, the fastest crew, the 26GHz frequency pop group, may not cover a large region, and trees and buildings can even impede their coverage. This band can deliver incredible speeds of over 1 gigabit per second. Consequently, a sub-GHz band like the 700 MHz band is more lucrative for companies than a GHz band.
Despite its advantages, it was not sold in the two previous telecom spectrum auctions, held in 2016 and 2021, due to the high reserve price. It cost Rs 11,485 per MHz in 2016, double the starting price of the 1,800MHz bands.
Telecom companies are already struggling in India’s cost market due to fierce competition and the need to pay off mounting debt related to gross revenues. Leading telecom providers such as Jio, Airtel and Vodafone Idea have increased the cost of their data and voice plans due to the country’s low total ARPU. In order for more consumers to buy 5G plans, telcos may also need to keep the price of the plans down. To do this, they may need to optimize and control the cost of the spectrum.
Jio’s recreation area
Jio is ahead of all competitors looking to offer 5G in the sub-GHz spectrum as it is the only 700MHz frequency band provider for its 5G connectivity. It will provide Jio with a broad spectrum portfolio and enable it to provide 5G services in rural areas at a lower cost.
The second largest telecom company in India, Airtel, was oddly absent from the list of operators competing for the band. Airtel senior executives have stated that the company will also not participate in future auctions for the 700 MHz spectrum band as its spectrum holdings and the additional radio waves it acquired in the just-ended auction are sufficient to provide high-quality 5G to offer services. For this reason, the authority decided against participating in the most recent auction for frequencies in the 700 MHz bands.
Jio spent a total of Rs 88,078 crore on the 700MHz, 800MHz, 1,800MHz, 3,300MHz and 26GHz bands. The general public may reportedly be able to enjoy 5G services by September or October, and the government plans to allocate ether by August 15.
edited and proofread by Nikita Sharma