Telcos Seek Cut in Base Price of 40GHz Waves

Explore how the proposed base price reduction for 40GHz spectrum affects telecoms and investors in the short and long term.

Source and citation: Lohchab, Himanshi. “Telcos Seek Cut in Base Price of 40GHz Waves.” ET Bureau, July 11, 2024.

Table of Contents

TLDR For This Article:

Telecom companies in India are advocating for a 50% reduction in the reserve price for the 40GHz spectrum to make deploying 5G networks more feasible and cost-effective.

Analysis of this news for a layman:

Telecom companies in India are pushing for lower auction prices for the 40GHz radio frequency spectrum. This spectrum is crucial for the next generation of mobile networks, known as 5G. The current asking price is considered too high, which could slow down the rollout of faster internet services. By reducing the cost, telcos hope to build these networks without passing too much cost onto consumers.

Impact on Retail Investors:

Potential for Growth: Stocks of telecom companies could rise if they acquire spectrum at lower costs and successfully deploy 5G services.
Risk of Increased Expenses: High initial investments in 5G could strain company finances, affecting dividends and stock values.
Market Dynamics: Investors should watch how spectrum pricing affects company strategies and market competition.

Impact on Industries:

Telecommunications: Directly impacted through reduced costs and potentially faster deployment of 5G networks.
Technology and Hardware Manufacturers: Could see increased demand for 5G-capable devices and infrastructure.
Service and Content Providers: Enhanced network capabilities could lead to new services and content delivery models, benefiting companies in these sectors.

Long Term Benefits & Negatives:

Benefits:
- Enhanced Connectivity: Long-term benefits include improved internet speeds and connectivity, fostering innovation and economic growth.
- Competitive Market: Could help maintain a competitive market landscape in Indian telecoms, preventing monopolistic practices.
Negatives:
- High Capital Expenditure: The cost of establishing 5G networks might remain high, impacting the financial health of telecom companies.
- Uneven Rollout: There’s a risk that only urban areas might benefit from the new technology, leaving rural areas behind.

Short Term Benefits & Negatives:

Benefits:
- Stock Market Reaction: Positive investor reaction to lower spectrum costs could boost telecom stocks in the short term.
- Increased Investor Interest: More affordable 5G rollout could attract more investments into the telecom sector.
Negatives:
- Initial Costs: Despite lower spectrum prices, the initial cost of rolling out 5G networks is still substantial.
- Regulatory Hurdles: Delays in policy implementation could stall the benefits expected from lower spectrum prices.

Companies Potentially Affected by 40GHz Spectrum Auction Reserve Price

Indian Companies Likely to Gain:

Reliance Jio (RJIL):
- Favors reducing the base price, indicating potential for deploying 5G private networks at a lower cost. This could improve their enterprise service offerings and market reach. Positive market sentiment is likely.
Bharti Airtel Ltd:
- Supports a data-driven approach to reserve price, potentially benefiting from a lower base price. This could aid their 5G rollout strategy. Positive market reaction is possible.

Indian Company with Uncertain Impact:

Vodafone Idea Ltd (Vi):
- Opposes the auction at this stage due to ecosystem concerns. A lower reserve price in future auctions could benefit them if they participate. However, the near-term impact is unclear. Market reaction would depend on Vi’s specific strategy.

Global Companies Likely Unaffected:

The article focuses on a domestic auction in India. Global companies are unlikely to be directly affected unless they have significant partnerships with Indian telecom operators.

Global Companies Potentially Unaffected:

There is no mention of specific global companies being negatively affected. However, companies supplying equipment for mmWave networks might see a slower rollout in India if the auction is delayed.

Important Note:

This analysis is based on the information provided in the article. The actual impact on specific companies will depend on the final reserve price set by the regulator and the participation of the telecom operators in the auction.