Mid-May 2010, the Telecom Regulatory Authority of India (TRAI) recommended that operators holding spectrum in excess of 6.2 MHz and within 8 MHz would have to pay a onetime fee to match the 3G spectrum price. For spectrum held beyond 8 MHz, service providers would have to pay 1.3 times the price of 3G spectrum.
That was the beginning of what has since erupted into a full-blown controversy. Existing GSM operators like Bharti Airtel, Vodafone Essar and Idea Cellular, which hold more than 10 MHz spectrum in many circles, have been crying foul. The move will entail a heavy financial outgo, burdening their already stretched balance sheets. The operators have issued statements declaring their disappointment over TRAI’s guidelines pertaining to the allocation and pricing of 2G spectrum.
“As a major player in the Indian communications market that has invested heavily to drive the industry and Indian economic development, Vodafone Essar is extremely disappointed with the TRAI recommendations on spectrum, licensing and M&A. We believe that they are retrograde for the industry and against the interest of consumers. By seeking to put tremendous additional financial burden on the pioneer companies, in the form of an arbitrary one-time charge on a portion of the old 2G spectrum but linked to ongoing 3G spectrum prices, the recommendations would place a critical industry in jeopardy. The TRAI recommendations are simply unworkable,” noted Vodafone Essar in a press statement.
Bharti Airtel has also voiced a similar sentiment. Its statement read, “The latest recommendations by TRAI for allocation of 2G spectrum are shocking, arbitrary and retrograde. They overturn all existing policies of Department of Telecommunications (DoT) for the past 15 years. These include recommendations made by various government committees and even TRAI’s own earlier recommendations. Besides, these are against all existing global norms for spectrum allocation and efficiency. It seems that the recommendations are designed to punish efficient and performing operators like us for contributing to the growth of the Indian telecom sector and are instead tailor-made to benefit select operators whose contribution to telecom growth and government revenues has been negligible.”
Idea Cellular too has criticised the TRAI move. Its media statement read: “For too long, the telecom sector policy has variously displayed characteristics of a quota raj, licence permit raj and an SSI mindset, conveying, unfortunately, impressions of crony capitalism. The sector and the nation deserve a new deal. We expect the government to seize the moment.”
Operators such as Tata Teleservices Limited (TTSL) and Reliance Communications (RCOM) that are on a dual technology platform do have excess spectrum like their GSM peers. In fact, TTSL’s main complaint against TRAI is that it has not even been given the spectrum owed to it in many circles. In a statement to TRAI, TTSL pointed out, “TRAI has completely ignored our status as a dual technology holder. TTSL should have been given precedence over those who have already received minimum start-up spectrum of 4.4 MHz and now have been recommended to get 6.2 MHz. It is important for TTSL to get a level playing field vis-a-vis other dual technology holders who got spectrum, especially as TTSL has been waiting for more than 30 months for the minimum start-up spectrum across various circles, including Delhi. We hope this will be rectified by the authorities soon.”
TTSL believes that TRAI could have instead looked to withdraw spectrum beyond 6.2 MHz from the incumbents, particularly when it has established that 6.2 MHz is enough to run efficient telecom services in most geographies. Even so, it finds the one-time levy on spectrum held free of cost by the incumbents acceptable.
RCOM has welcomed TRAI’s recommendations on allocation and pricing of 2G spectrum, terming them as “consumer-centric”. According to Syed Safawi, CEO, wireless business, RCOM, “TRAI’s recommendations will lead to spectrum efficiency and rural penetration. The government would be able to release additional spectrum.”
However, the fact is that RCOM would have to pay only about Rs 220 million for the excess spectrum it holds in Bihar if the regulator’s recommendations are accepted by the telecom ministry. In contrast, Bharti Airtel would need to cough up Rs 61.46 billion and Idea Rs 24.81 billion, according to brokerage firm Prabhudas Lilladher.
Seeking to assuage the fears of the big four mobile operators, TRAI has said that the total outgo on the excess spectrum would not exceed Rs 120 billion for all operators. “There is no need for anxiety as the payout for each of these four companies is not much. According to TRAI estimates, Bharti Airtel’s outgo will not be more than Rs 34.9 billion while Vodafone’s would be Rs 28.49 billion. Mahanagar Telephone Nigam Limited would have to shell out Rs 26.69 billion and Bharat Sanchar Nigam Limited about Rs 30.40 billion,” said TRAI chairman J.S. Sarma.
He further pointed out that the outgo would come down if the proposed licence fee of 6 per cent comes into the picture. In that case, the net outgo for Bharti would be only Rs 15 billion.
There doesn’t seem to be any easy solution to this issue. Several rounds of discussion seem to be on the cards between the operators and TRAI before the recommendation can translate into policy.
