28 February 2025
India’s Union Cabinet has recently approved the refarming of 687MHz of spectrum from various government ministries for the deployment of 5G and future 6G services. It estimates that 2000MHz will be required by 2030 – more than double the currently available 900MHz1. This newly released spectrum will be key in closing the gap between current supply and expected demand.
However, in light of India’s track record of leaving spectrum unsold in auctions, the question is whether the real issue here is one of supply or of spectrum pricing?
Is there an issue with the supply of spectrum?
Over the last 15 years, India has held nine spectrum auctions in relatively quick succession. These auctions have made a wide range of spectrum bands available, around 900MHz in 9 bands from 600MHz to 3500MHz and 2850MHz in 26GHz.
Whilst a good supply of spectrum is thus available, there has been a recurring theme of unsold spectrum in these auctions.
A prime example of this is the 700MHz band, which has so far been offered in three awards in 2016, 2021 and 2022. In the first two auctions, all spectrum in this band remained unsold. In 2022, the TRAI managed to sell 2×10MHz of the available 2×25MHz to Jio after reducing reserve prices by 68% relative to the 2016 award. The situation is similar in other bands. For example, all of the 2×30MHz available in the 600MHz remained unsold in the 2022 award.
The chart below summarises the amount of unsold spectrum in all Indian auctions in the past decade. Except for the 2015 award, all subsequent awards resulted in vast amounts of spectrum not selling. Notably, the 2016, 2021 and 2024 awards all saw ≥66% of the available spectrum remaining unsold.
Is there an issue with high reserve prices?
Following very competitive auctions in the early 2010s, which set an expectation of high spectrum values (and thus, prices), the Indian government has tended to set high reserve prices, making it difficult for operators to acquire sufficient bandwidth at reasonable cost as the supply of spectrum has increased.
While the demand for more spectrum is undeniable given the exponential growth in data consumption and the rollout of 5G, these high reserve prices have often been cited as a deterrent for operators. With increasing pressure on ARPUs due to the competitiveness of mobile markets, operators cannot afford to see their spectrum bills multiply as their spectrum demand increases.
Global comparisons, illustrated in the chart below, indicate that India’s average reserve prices across all auctions in the past decade are significantly higher than international benchmarks. Even without adjusting the benchmarks for wealth, India’s reserve prices are on average higher than the median of global benchmarks for all bands except for the 850/900MHz and the 3500MHz bands. However, the Indian average reserve prices are significantly higher than benchmarks once we adjust for GDP per capita (with benchmarks being a staggering 2%-16% of the Indian reserve prices).
Summary
There is a need for more IMT spectrum globally, and India is no exception. The Union Cabinet’s decision to release more spectrum is definitely the right step forward to address the growth in data consumption.
However, to ensure successful spectrum assignments, the government must balance increased supply with realistic pricing. If reserve prices remain prohibitively high, operators will continue to struggle to justify any spectrum investments, leading to large portions of spectrum remaining unsold. This inefficient utilisation of valuable spectrum resources impacts services for consumers and the cost of running mobile networks.
This issue is not unique to India. High reserve prices and unsold spectrum have been observed in many other countries. For example, a large part of the 1800MHz band – one of the most valuable 4G assets for MNOs – has been left unsold in Thailand for a long period of time. In Mexico, Telefonica handed back all of its spectrum assets due to high spectrum costs.
In summary, before India can reap the benefits from an increased spectrum supply, it needs to fix its spectrum pricing. A more flexible and market-driven pricing approach could lead to more efficient spectrum utilisation and better outcomes for consumers and the industry.
[1] Excluding spectrum in 26GHz
