The telecom industry is expected to shell out around Rs 1-1.1 lakh crore on the 5G auction, despite telcos’ reservations over high spectrum prices, ICRA said on Wednesday but cautioned that sector debt level is likely to rise with upcoming auctions.
The auction of over 72 GHz of the spectrum is set to commence on July 26,2022.
According to Icra, given the relaxed payment terms for the auction, the upfront outgo is likely to be around Rs 10,000 crore for the industry.
It said industry ARPU (Average Revenue Per User) is expected to increase to Rs 170 by the end of FY2023, driven by tariff hikes and consistent up-gradation of subscribers.
“While telecom operators consider reserve prices to be very high, nonetheless Icra expects telcos to buy spectrum worth around Rs 1-1.1 lakh crore in these auctions, which will be primarily towards developing 5G capabilities but also plugging other gaps,” it said in a statement.
While the upfront payment may remain low as Trai has recommended an elongated payment plan, the total debt on the industry is likely to increase, which is expected to keep the debt metrics subdued, the rating agency explained.
ICRA’s comments came in the wake of the Cabinet approval for the auction of airwaves capable of offering fifth-generation or 5G telecom services, including ultra-high-speed internet.