The country?s top three mobile operators ? Bharti Airtel, Vodafone and Idea Cellular ? who collectively serve half of India?s 900 million cellphone users, suffered a major jolt on Wednesday with the Telecom Commission recommending that the entire spectrum they hold in the more efficient 900 MHz be taken back and auctioned. Under this refarming process, if the companies manage to win in the auctions, they will be able to retain the spectrum or, in lieu, they would be given the less efficient 1,800 MHz at the auction-determined price.
The operators have said the decision would make their R1.5-lakh-crore investment in networks redundant. Further, replacement of base stations and deployment of additional sites would entail an incremental capex of R54,739 crore and incremental opex of R11,762 crore, which, if passed on to consumers, would lead to tariff hikes.
Recommendations of the Telecom Commission, the highest policy-making body in the department of telecommunications having inter-ministerial representation, will now be put before the empowered group of ministers for final ratification.
The proposal was first mooted by the Telecom Regulatory Authority of India and is the last agenda before the EGoM that needs to be finalised.
The first such auction is planned during the first half of 2013 when the spectrum held by Bharti and Vodafone in the metro circles of Delhi, Mumbai, Kolkata and Chennai will be refarmed. However, the actual migration would happen in November 2014, when these licences come up for renewal, telecom secretary R Chandrasekhar said. Licences for other circles will come up for refarming in 2015 and 2016 when others like Idea and even Reliance Telecom will be affected.
In 2013, 16 MHz of spectrum will be put up for auction in Delhi and Mumbai, 14 MHz in Kolkata and 13.4 MHz in Chennai circle.
The base price for the 900 MHz spectrum would be twice that of the 1,800 MHz; so it would be about R28,000 crore.
The industry?s reaction was on expected lines. While the GSM operators? association, the Cellular Operators Association of India (COAI), termed the move retrograde, rival association of CDMA dual-tech operators, Association of Unified Service Providers (Auspi), welcomed the move.
The reason for Auspi welcoming the move is understandable because they entered the GSM space only in 2007-08 (Reliance Communications and Tata Teleservices) and have spectrum in 1,800 Mhz. However, RCom’s subsidiary RTL has spectrum in 900 MHz in eight circles where it started services much earlier.
In a detailed response to the refarming proposal, COAI said not only would it make the investments by the industry worth Rs 150,000 crore redundant but would also trigger a tariff spike due to new network planning. Since networks are designed according to spectrum bands, any change in them requires new designing, which entails fresh capex.
?COAI emphasises that full refarming of 900 MHz band will have wide-scale ramifications on customers, technology, operators, investors, competition and the society at large adversely impacting the industry and national growth. Spectrum refarming is tantamount to forcible dislodgment of a legitimate occupant and goes against licence terms and conditions. Networks are designed around frequency bands, not the other way round. There is no precedence in the world, where any telecom network, let alone some of the world?s biggest telecom networks, has had its frequency band uprooted,? the association said in a statement.
Quoting an independent study by Analysys Mason, COAI pointed out that operators would need to replace 2,86,590 base stations and install an additional 171,954 base stations to provide equivalent coverage on 1,800 MHz.
The same study has also said that if the incremental investment in refarming and the costs of spectrum are passed on to consumers, overall tariffs would go up by as much as 64 paise per minute. In addition, operators will also have to write off their existing 900 MHz assets at an estimated cost of Rs 22,310 crore. At an industry level, an additional capex of about Rs 26,653 crore will be required to deploy new towers to support the incremental base stations.
