New Delhi: The department of telecommunications (DoT) has set for itself an ambitious target of completing the procedure for auctioning 5G spectrum by August next year.
Speaking on the sidelines of a workshop done with states and union territories, Telecom Secretary Aruna Sundararajan said on Monday: “We expect to complete due process by July-August 2019. I cannot say whether spectrum auction will happen by then, but we will be ready after the second half of 2020.” It did not mean the whole country would be in 5G but it would be available in certain pockets, she said.
The DoT secretary added while the Telecom Regulatory Authority of India had given preliminary recommendations on the proposed auction, the working committee at the DoT was looking at the details. A separate task force on 5G has given a broader set of (spectrum) bands they can work on.
Telcos, however, say the target is ambitious, considering the fact that the industry is reeling from a debt of Rs 7.6 trillion on average gross revenues of only Rs 2.5 trillion and an Ebidta (earnings before interest, depreciation, taxation and amortisartion) margin of 20-22 per cent.
The telcos have to fork out Rs 245 billion next year as deferred payment for spectrum, which they bought earlier and which is equivalent to their entire EBITDA. That apart, they are investing $8-10 billion (Rs 576 billion to Rs 720 billion) in expanding their networks as well as partly paying for spectrum. Rajan Mathews, director general of the Cellular Operators Association of India, said: “As there is no shortage of spectrum anymore and especially in 5G, you can put them under auction every year, but considering the financial situation, I don’t think anyone will be bidding for 5G, especially at the high price recommended by Trai.”
Mathews said there might be some demand from telcos for 4G spectrum in the 2300 band.
Vodafone-Idea, which has a huge debt overhang, has told the DoT not to hold auction till 2020, when the eco system for 5G gets evolved.
Telcos say they do not expect the price war, unleashed in the market with the coming of Jio, to ease in the next one to two years, and hence they hardy have any money for 5G. That is primarily because Jio is looking at grabbing a 40 per cent revenue share of the market, which is still a long road to go. “In a situation as we are, the focus for us will be to maintain our revenue share and invest in the network to ensure that customers stay with us, not 5G,” said a senior executive of a leading incumbent telco. Also business-to-business applications, which would be required to power 5G, which will offer speeds 100 times faster than 4G, have to be developed and made commercially viable for a business case to justify investment.
Jio has demonstrated applications on 5G (like facial recognition systems and robotic surgery) and also point out that their network is 5G-ready. Equipment makers like Huawei are gearing up for field trials in the first quarter of 2019 and the DoT has invited it, along with Ericsson and Nokia, to do so.
Trai had earlier recommended the auction of spectrum, which included 5G spectrum, at an estimated base price of over Rs 4.94 trillion. As much as 6000 Mhz of spectrum will be available in 5G, which includes both lower as well as higher bands.
RBI Governor Das, bankers may not be on same page over passing rate cuts
Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das will meet bank chiefs to impress upon the need to improve transmission within the confines of it being a business decision. However, certain indicators suggest that bankers won’t be wrong in disagreeing with Das on the all-important rates issue.
So far, only State Bank of India (SBI) has reduced its home loan rates (up to Rs 30 lakh) by only five basis points (bps) after the policy rate cut of 25 bps on February 7.
High credit deposit (CD) ratio, with incremental ratio over 100 (indicating credit disbursement is more than deposit mobilisation) leaves banks with no room to cut deposit rate. They cannot cut lending rates without cutting deposit rates. Even when deposit rates are pared, because of their fixed nature, the cost of deposit doesn’t come down readily. Contrary to that, the lending rate cut immediately translates into hit on profitability.
Pallab Mahapatra, managing director and chief executive officer of Central Bank of India, said his bank’s marginal cost-based lending rate (MCLR) for one year and deposit rates are already lower than many large banks. For reducing loan rates further, the bank will have to cut deposit rates further, which would make the bank vulnerable to poaching for deposits from competing banks. And this, therefore, makes transmission a challenge.
One reason why the banking system is also increasingly getting vulnerable to rates is because the low cost current and savings account deposits (CASA) are running down as a share, whereas costly bulk deposits are increasing because of liquidity tightness in the banking system.
The system liquidity was running a deficit of more than Rs 1 trillion as on Tuesday, having improved from Rs 1.13 trillion on February 18. This is despite RBI’s bond purchases from the secondary market reaching about Rs 2.7 trillion. The liquidity deficit will only increase with tax-related outflow from companies in the coming days. “Liquidity is leaking from other channels also, for example, high currency in circulation (CIC) in an election year,” said a senior economist.
Latest data shows currency in circulation, as on February 15, was at Rs 21.06 trillion, compared with pre-demonetisation level of Rs 17.97 trillion. The growth in CIC on a year-on year basis was 18.4 per cent, much higher than the normal 13-14 per cent even in busy periods.
Clearly, the RBI’s record open market operations (OMO) was not enough when supply of bonds remained elevated, and while not much of dollars are flowing into the country.
Growths set to slow down to 6-6.5% in H1 of 19: Nomura
Mumbai: Despite the almost lose fiscal and monetary policies, the economy is likely to slow down to 6-6.5 percent in the first half of 2019, due to weak global demand, political uncertainty and tighter financial conditions, says brokerage report.
The Reserve Bank under the new governor had last week projected a GDP growth of 7.4 percent for 2019-20–7.2-7.4 percent in first half, and 7.5 percent in the second half.
“Consistent with our index, we expect GDP growth to slow from 7.1 percent year-on-year in the third quarter of 2018 to 6.6 percent in the fourth quarter and further to 6-6.5 percent in the first half of 2019,” Japanese brokerage Nomura said in a report Tuesday.
Citing the fall in the Nomura composite leading index fell to 99.9 in Q1 of 2019 from 100.1 in Q4 of 2018, indicating the business cycle is headed lower, at least into the first half of 2019, the report said.
“Fiscal and monetary policies are turning expansionary but are unlikely to change the near-term trajectory,” the report added.
The monetary and fiscal policies have shifted to easing mode, although it remains cautious on their near-term impact, it said.
“On fiscal policy, while we compute the fiscal impulse of the budget at 0.36 percent of GDP, we foresee implementation challenges ahead of the government’s ‘farm charm’ package,” it said.
On monetary policy, the RBI reaffirmed its focus towards headline inflation and its willingness to support growth, which suggests the February policy cut was not a ‘one and done’, it said.
“With its inflation projection remaining below the 4 percent target through 2019, and our assessment that growth will disappoint the RBI, we expect another rate cut in Q2 (very likely in the April review),” it said.
As the previous divergence between exceptionally low food and elevated core inflation closes, the report does not assess the need for a deeper rate cut cycle. It sees a 20 percent probability to a third rate cut in the third quarter.
Indian economy fundamentals sound, set to reach USD 5 trillion: PM Modi
Seoul: Prime Minister Narendra Modi on Thursday said fundamentals of the Indian economy are sound and it is on the way to becoming a USD 5 trillion economy soon.
Addressing the India Korea Business Symposium here, he said India is now a more open economy and has attracted USD 250 billion foreign direct investment (FDI) in the last four years. He said no other large economy in the world has grown at 7 per cent year after year.
India, he said, has jumped to 77th spot on the World Bank’s ease of doing business ranking on the back of reforms and is determined to break into the top 50 next year.
The role of the government is to provide a support system, Modi said, adding that India has emerged as a land of opportunities.