Funding the 5G infrastructure in times of stress

Finding innovative investment solutions will be key to the adoption of 5G technology in the country, argues R.S. Sharma, chairman, Telecom Regulatory Authority of India (TRAI). His argument makes eminent sense given that there is a question mark on the ability of the private telecom players to invest in this technology. They have become reluctant bidders for the 5G spectrum, especially after the Supreme Court’s decision on adjusted gross revenue which has really stretched their balance sheets.

Also, the financing required is mind-boggling, to say the least. While there are different numbers floating around, PHD Chamber of Commerce and Industry’s Sandeep Aggarwal pegs the total investment needed to make 5G a success in India at Rs 3.2 lakh crore. Aggarwal is chairman of the telecom committee at the industry body.

Aggarwal was, in fact, quoting from the National Infrastructure Pipeline plan of finance minister Nirmala Sitharaman, where she stated that the share of investment in Digital India (Telecom) is likely to be ₹3.2 lakh crore, of which 78% will be borne by the Centre (₹2.5 lakh crore) and the rest by states.

For Sharma, the solution lies in unbundling various services so that telecom operators like Airtel, Vodafone-Idea, etc. are spared the onus of making all the investments for providing complete end-to-end services to customers. These investments include buying spectrum, setting up necessary networks and data centres and finally ensuring that there is last-mile connectivity between the telecom providers and the end customers. Providing so many services has been putting a huge amount of load on the telecom operators.

This has been the paradigm so far. “The advent of new technologies has enabled us to rethink the paradigm—the need to unbundle networks, services, and infrastructure, and it can be done,’’ contends Sharma.

Already there is a category called infrastructure providers and TRAI is holding regular consultations with various players to see how these companies can provide active and passive infrastructure to the telecom players. “Similarly, there will be network providers, software providers, maintenance providers and hence all these investments will get distributed,’’ says Sharma.

For instance, if a farmer wants to use 5G for precision agriculture, it will not be telecom players who will provide services for the sensors in the field to measure things like moisture and fertiliser content in the soil, etc. Such services like capturing data from these sensors will be provided by virtual network providers.

And it is not that India does not have the necessary experience in terms of sharing infrastructure. In 2005-06, the concept of sharing of towers was first adopted by India, says Sharma, and later by other countries. “Today, the average tenancy ratio is between 3 and 4. (Tenancy ratio refers to the number of tenants or operators who have put up their antennae and other active infrastructure on the towers). “We have understood that competition [is] at the front [end] and it is not contrary to the collaboration at the back end,’’ says Sharma.

And when you have unbundled networks and services, there will be a lot of global investors, who are interested in investing in a specific business in the telecom sector. “I have been told that ₹1,00,000 crore has come into the tower business from Brookfield and others,’’ he adds.

So, it is possible to “solve the problem of efficiency, sharing, investment, and putting more infrastructure by unbundling the telecom value chain and designing such policies around it,’’ says Sharma.

Others like Aggarwal argue that the best way to raise funds is to tap into the billions of dollars lying in European banks, which are currently earning negative interest rates. “The best way to do so is to provide them with guaranteed availability of users and thereby monetise existing assets,” contends Aggarwal.

And that can only happen if there is a sharing of infrastructures like all operators using a single infrastructure or two or three of them deciding to merge their infrastructure. “If infrastructure sharing becomes a reality, foreign investors will be guaranteed certain user numbers and therefore would be interested in investing,” says Aggarwal.

Many experts believe that 5G auctions should be taken up after three years from now so that the government gets proper valuations. If the 5G spectrum is auctioned now, the licence fees would be frozen for the next 20 years and the government will lose money, also the operators will also lose since they can fully use the bandwidth only after three to five years.