TRAI recommends 35-40% cut in prime 5G band price; what it means for telcos, which stock to benefit the most? Analysts decode

Ahead of the rollout of 5G services, the Telecom Regulatory Authority of India (TRAI) on Monday has recommended about a 35 to 40 per cent reduction in prime 5G band price, while mooting a mega auction plan valued at over Rs 7.5 lakh crore at the base price across multiple bands for radiowaves allocated over 30 years.

Despite positive development on this front, Bhart Airtel closed 2% lower, Vodafone Idea dropped over 2% and TTML settled with more than 2% cuts on the BSE on Tuesday. Source: Reuters

Ahead of the rollout of 5G services, the Telecom Regulatory Authority of India (TRAI) on Monday has recommended about a 35 to 40 per cent reduction in prime 5G band price, while mooting a mega auction plan valued at over Rs 7.5 lakh crore at the base price across multiple bands for radiowaves allocated over 30 years.

As per experts, the development would primarily help major players like Bharti Airtel and Reliance Jio.

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Zee Business research analyst Kushal Gupta on Tuesday said that the news can be seen as a big relief for telecom companies, especially three leading players—Bharti Airtel, Reliance Jio & Vodafone Idea.

Though all major telecom stocks ended in the red amid volatility in the market on Tuesday , the news certainly brings spotlight on these shares.

Meanwhile, despite positive development on this front, Bhart Airtel closed 2% lower, Vodafone Idea dropped over 2% and TTML settled with more than 2% cuts on the BSE on Tuesday.

Arun Malhotra, Founding Partner & Portfolio Manager, CapGrow Capital Advisors, said that the TRAI recommendations are very favorable for the sector and the current incumbents. The spectrum pricing has been reduced, while a lot of flexibility has been provided for payment options, he said.

"Both the option of upfront payment as well as 30 annualized payments have been given to Telcos. The cap of 40% on combined spectrum holding is a welcoming as it will ensure that bidding doesn’t overshoot as well as the allocation is well distributed," said Malhotra.

He said this will allow telcos to provide private networks as a service to enterprises by using network resources, such as through network slicing, over its Public Land Mobile Network (PLMN). "Other positives in the TRAI recos include the easing of rollout obligations and spectrum surrender," said the expert.
Trai recommendation is due to the experience that last two times there were unsold spectrums during the bid, said Vijay Dhanotiya, Lead of Technical Research, Capitalvia Global Research Ltd.

Which telcom player to benefit the most?

As far which telecom player is likely to benefit once TRAI recommendations are accepted, Dhanotiya said most of the telecom sector companies will benefit but the biggest gainers will be the Bharti Airtel and Jio as they are the biggest players in the market. "Airtel seems ready to benefit with the technology and if price cuts in 5G band prices, it will have an edge over its competitors," he added

Malhotra said that the changes are positive for the entire sector, but Bharti Tele will be a major beneficiary along with Jio.

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