Will debt issues undermine Indian 5G rollout?

Will debt issues undermine Indian 5G rollout?

There’s still no sign of respite for Indian operators over outstanding payments owed to the government as local press reports indicate that the Indian government has warned all telecom licence holders against any delays in the payment of dues related to adjusted gross revenue (AGR).

That said, it has asked them to seek clarifications by December 13 on any doubts that may not have been covered in the recent Supreme Court judgment. This, however, will not necessarily make payment less likely.

Companies had three months to make the payments after the Indian Supreme Court decided in favour of the government’s argument that all revenue, including that from non-core sources, would be counted in calculating AGR. Bharti Airtel (which owes some $4.9 billion) and Vodafone Idea (which owes about $7.4 billion) are the worst-hit operators and last month filed for a limited review of the judgment.

Now Indian business commentators are pointing out that the combination of the recent AGR ruling, high spectrum pricing and inadequate 5G spectrum supply, among other industry challenges (including other debts owed by operators), may stymie attempts to get 5G up and running in India.

Rajan Mathews, director of the industry association COAI, has been quoted in the Indian press as saying that operators are unlikely to bid for 5G spectrum auctions if the auctions are held in the next two quarters (January to June). Not just debt payments but the fact that 5G spectrum pricing is up to five times what operators in many other countries pay for spectrum won’t help.

The government seems to believe that tariff increases by the three non-state operators, along with a two-year moratorium on spectrum payments, will give carriers enough financial strength to participate in the sale. But massive infrastructure investments required to monetise the spectrum – on top of auction prices – are an additional disincentive. And what could it mean for India’s competitive edge and attractiveness to investors if 5G is delayed while competing regions – like China and the US – go ahead?

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