How Adani Can Enter Consumer Side Of Telecom Sector

by Swarajya Staff - Jul 12, 2022 08:43 AM +05:30 IST
How Adani Can Enter Consumer Side Of Telecom SectorGautam Adani, chairman of Adani Group (@gautam_adani/Twitter)

Gautam Adani is entering the 5G spectrum race for captive use in his own ports-to-power conglomerate, but an entry into the consumer side of the business at a later stage cannot be ruled out.

Why so: Adani is Asia’s richest billionaire. He does not lack the resources to bankroll and consumer foray.

  • The Indian telecom sector has only two strong private players, Reliance Jio and Bharti Airtel, creating an entry opportunity for Adani.

  • The other two players, Vodafone Idea and BSNL, are shaky. Vodafone Idea is valued at just over Rs 28,000 crore — of which 32 per cent is with the government after the conversion of dues into equity.

What's up now: The government announced that captive network operators will be allocated 5G spectrum — that is, they won’t have to bid for it at auctions scheduled for later this month.

  • This announcement had set off a lobbying war between big tech players, including TCS, Google, and Amazon, who want spectrum for private use and the Cellular Operators Association of India (COAI), the lobbying arm of the consumer telecom industry.

  • The COAI has said that direct allocation means the creamiest part of the 5G business, solutions sold to companies by the telcos as a package, will now be cannibalised for private use.

Where Adani stands: The entry of Adani directly in the spectrum race — instead of waiting for allocations of spectrum later — implies that the group is planning to bid for spectrum in the millimetre band (24250-27500 Mhz band), or even in the pricier 3.5 Ghz band, at least in the circles it is interested in.

  • The Adanis would have to pay barely Rs 2,800 crore (spread over two decades) for 400 Mhz of all-India spectrum in the millimetre band, and something more for the 3.5 Ghz band in some circles, again with payment terms spread over 20 years.

  • Thus far, telcos have had to enter the business at the mass end with low tariffs, but Adani will enter at the top end of the business in 5G.

The opportunity: Adanis can expand their business later to provide commercial services to other enterprises. Thus, the telcos operating at the mass end of the market will start losing the most profitable parts of their businesses.

  • Vodafone Idea has two promoters, Vodafone Group UK and the Aditya Birla Group, who do not want to pump more money. At some point, one of them may want to exit, after the other promoter agrees, and the government too may want to exit from its 32 per cent stake at a profit.

  • Neither Airtel nor Jio can bid for Vodafone, since that would fall foul of competition law. That leaves Adani as the only logical local bidder for Vodafone Idea’s shares with the government.

  • With 259 million subscribers, according to April data from TRAI (No 3 after Jio’s 405 million and Airtel’s 361 million), Vodafone has the potential to raise market share, provided it gets a rich promoter with the willingness to invest.

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