MUMBAI (NewsRise) -- Bharti Airtel may skip the Indian government's upcoming spectrum auction for next-generation cellular technologies because of the high price of airwaves, as the mobile phone carrier reels under staggering debt and government levies.
India is set to sell spectrum worth about $74 billion -- mostly 5G airwaves -- in an auction scheduled in the first quarter of the next fiscal year that begins in April. The high-speed 5G networks are crucial for new internet technologies such as artificial intelligence and cloud computing. The government is hoping for a windfall from the auction to bridge its widening fiscal deficit amid shrinking tax collections.
"5G requires a large block of spectrum," Gopal Vittal, the India and south Asia chief executive of Bharti Airtel, said in a conference call on Wednesday, a day after the company reported a wider-than-expected third-quarter loss. Vittal said the reserve price recommended by the telecommunications regulator for the 3.5-Megahertz band for a block of 100 MHz is 500 billion rupees ($7 billion), which "we can't afford."
"We believe it is too high a price," he said. "We will not pick it up at those prices."
Instead, the company remains focused on improving its 4G penetration which is barely 44% of overall Indian subscriber base at the end of December.
Bharti, backed by Singapore Telecommunications, is barely recovering from a prolonged period of price cut amid stiff competition from rival Reliance Jio Infocomm, owned by billionaire Mukesh Ambani's Reliance Industries. Jio's strategy of offering free voice calls and cut-rate data tariffs wreaked havoc on an industry that was already contending with high regulatory fees and levies.
In December, mobile phone operators in India rolled out the first tariff hike in more than three years after prices hit a rock-bottom. While Bharti's average revenue per user expanded to 135 rupees, Vittal said the industry needs to see an average revenue of 300 rupees per user to earn "reasonable" return of capital on overall business.
Meanwhile, Bharti, Vodafone India, and other telecom firms are slammed by a government order to pay $13 billion in unpaid dues after a Supreme Court ruling upheld the demand. Bharti owes 355.9 billion rupees to the government, while Vodafone owes about 500 billion rupees.
The ruling pushed Bharti to warn in November about its ability to remain a going concern, though last month it managed to raise $3 billion in equity and debt, dispelling such fears.
On Wednesday, Vodafone Group said the outlook for Indian operations remains "critical" and that the company is seeking some relief from the government. A plea filed by the operators seeking reprieve on the Jan. 23 deadline previously set for the payment is still pending with the Supreme Court.
Vodafone Idea's British parent had in November said it won't make any further investments in the Indian venture, while its local partner Aditya Birla Group's Chairman Kumar Mangalam Birla warned that the company will shut down if the government does not offer a reprieve on its liability.
At the conference call, Bharti's Vittal said he expects Vodafone Idea to survive. "I wish it thrives. India needs a three-player market. It will be good from all perspectives -- investment, jobs, reputation," he said.
Bharti had $16.1 billion in debt at the end of December.
Shares of Bharti closed up 2.5% at a record high of 546.75 rupees in Mumbai trading on Thursday, while the benchmark S&P BSE Sensex gained 0.4%.
--Dhanya Ann Thoppil