Here's why the 5G spectrum bid is a big opportunity for Adani

The decision of the Adani Group to participate in the race to acquire 5G spectrum has been a surprise to many. It throws open the possibility of entering cellular mobility, a market that is today controlled by three large players. India is among the most affordable telecom markets globally – from a market where voice and data were charged separately at one point -- the more affordable offering of today with unlimited voice calling and data usage liberally thrown in is a big story. In the process, it has placed the mobile device in the hands of virtually every Indian.

For its part, the group has clarified that it has no plans to offer consumer mobility, with the intention being to use it for captive private networks. That said, the possession of 5G spectrum puts the group in a position of advantage, especially when we look at the diversified business portfolio it has – infrastructure with ports, road construction, and power to name a few, all the way to FMCG, where it has a large edible oil portfolio. An interesting development was when the group, late last month, secured a letter of intent (LoI) from the Department of Telecommu­nications (DoT) for the grant of a unified licence for the Gujarat circle. This means the group can now offer both long-distance calling and Internet facilities in the state.  

To Deven Choksey, MD, K R Choksey Securities, the implication of this is fairly straightforward.

“It lies in creating a private virtual network and that is a compelling proposition. Their businesses operate on a shared network basis today and costs can easily drop by owning spectrum apart from increasing the levels of reliability,” he explains.

But that will come at a price, with even the most conservative estimates suggesting that the government, through auctioning spectrum, can raise at least Rs 4.3 lakh crore. On obtaining the LoI for Gujarat, he explains that it is the group’s “major business base and, therefore, quite logical for them to have a big focus. Besides, the potential acquisition of 5G spectrum will mean IT is not a capex but an opex head.”

A foray into mobility is also possible but in today’s market, which is so challenging on costs and the arduous process in recovering that, it is a tough ask.

“In the immediate term, that looks difficult since telecom is quite a mess and it may not interest them,” says Choksey. The other opportunity, points out Vinit Bolinjkar, Head (Research), Ventura Securities, lies in enterprise connectivity. “It throws open areas such as edge computing or automated cars. Access to 5G spectrum can make a huge difference here.” To him, the ambition of the group to have a major play in data (early last year, Adani Enterprises joined hands with EdgeConneX, a leading data center operator to develop 1 GW of data centre capacity over the next decade – is the backdrop. “The ability to serve a large base of corporate customers is a business that can be built on. However, they will look at consumer mobility closely,” he adds.

On the big outgo on spectrum purchase, it can be managed for the financially strong group. The recovery, thinks Choksey, can easily take place over a three-year period. “Besides, the payment for spectrum will be spread over a period of say, ten years and it gives the Adani Group ample time,” he says.

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