NEW DELHI Reuters -- India's telecom giants are likely to make muted bids at the 5 G spectrum auction in July, because they fear they will lose 40% of their potential revenues due to the allotment of some airwaves to enterprises for private networks, industry sources said.
Reliance Industries' Jio and rivals Bharti Airtel and Vodafone Idea have failed to lobby New Delhi to sabotage the allocation that will allow businesses, including Amazon.com and Tata Consultancy Services, to get airwaves without auction.
The telecom companies are quite upset, there will be an estimated 40% potential 5 G revenue loss, said S.P. The director general of the Cellular Operators Association of India, Kochhar, represents the three telcos.
As uptake by price-conscious retail consumers will be slow, they wanted to justify investments worth billions of dollars, according to Kochhar, who said they were counting on demand from the enterprise side.
Five other telecom industry executives told Reuters that the rise of private 5 G networks is a negative for the business case for the telcos, which are now likely to make muted bids in the auction.
Reliance, Airtel and Vodafone didn't respond to Reuters' emails requesting comments.
The government said that permitting private networks, like in South Korea and Germany, would spur innovation of automation and other technologies in places like factories or ports, without worrying about bandwidth or latency issues.
The launch of 5 G services in the world's No. Research group Omdia said this month that China's 2 mobile market is a watershed moment for the country and the global 5 G market.
In its report, Omdia said that over 50% of India's enterprises want to use 5 G within 12 months. Private network suppliers are in demand and that's why it's so.
Analysts at India's IIFL Securities pointed out a risk of dilution of 5 G-linked upside from enterprises Telecom companies have complained of too high base 5 G spectrum prices, seen as among the highest in the world.
With private networks expected to chip away at demand, telecom giants are likely to only bid for four of the 10 bands on offer for an estimated $9 billion, IIFL said.
GSMA said overall spectrum costs in India as a proportion of telcos' annual recurring revenue stood at 32%, the highest in the world.
The bleak outlook comes as Airtel and Vodafone reel from a price war triggered by Reliance in 2016.
In recent years, Airtel and Vodafone have reported losses, squeezed by the government, but recent mobile data price hikes have slowly helped the former to clock profits.
The potential loss for telecom firms is a boon for companies that are planning to introduce private 5 G network services. Over two dozen countries have paved the way for such networks.
There will be no entry fee for 10 years licences for private networks, which can be built by firms with net worth of over 1 billion rupees $13 million. It is not known if there will be any other charges.
After regulatory clearances, the spectrum will be assigned.
The government wants to start the roll out of 5 G by spring 2023, which can provide much faster data speeds than 4 G.
A public telecom network can be used to meet the needs of the masses but the varying demands of an enterprise can only be achieved through dedicated private 5 G networks BIF has said.
In June, BIF said that private 5 G networks provide India an excellent opportunity to catch up with the world.