» Business » Telcos face Rs 1.15 lakh-cr hit on spectrum refarming

Telcos face Rs 1.15 lakh-cr hit on spectrum refarming

By BS Reporter
October 18, 2012 08:24 IST
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In a major setback to incumbent telecom operators Bharti Airtel, Vodafone, Idea Cellular, BSNL and MTNL, the Telecom Commission today decided all spectrum given to operators in the 900-MHz band would be refarmed to the 1,800-MHz band at the time of renewal of licences, beginning 2014.

The total amount of spectrum with the operators is around 21 MHz in each circle.

The move, if accepted by the empowered group of ministers (EGoM) on telecom set to meet tomorrow, would mean the operators together take a hit of over Rs 1.15 lakh crore to migrate their 900-MHz network and subscribers to the 1,800-MHz band, according to an analysis by Analysys Mason on behalf of the Cellular Operators Association Of India (COAI).

The burden operators and subscribers would bear if proposal accepted

Rs 1.15 lakh cr  Amount by which Bharti Airtel, Vodafone, Idea Cellular, BSNL and MTNL would be hit due to refarming

64 p/min Average additional amount that consumers might have to pay 

Rs 54,739 cr Incremental capex required for replacement and deployment of base stations 

Rs 11,762 cr Incremental annual operating expenditure 

Rs 22,310 cr Operators have to write off because of 900-MHz assets 

Rs 26,653 cr  The required additional investment to expand tower base 

40% Fall in geographic coverage, affecting 70 million customers, if incremental expenditure is not made by operators 

Source: Analysys Mason report for COAI

The move will have an adverse impact of consumers, who might have to fork out an additional 60 paisa per minute in case operators pass on the increase in costs. Currently, the average tariff for a minute is Rs 1 per minute.

In 2010, sector regulator Trai had recommended refarming of the 900-MHz band, as globally it was being used for 3G services and was a valuable band that should not be used uneconomically to give 2G services. The Cabinet has already permitted refarming as part of the new telecom policy.

The commission had discussed three alternative proposals in the meeting today — one that envisaged retention of up to five MHz of spectrum, another of retention of up to 2.5 MHz and the last of refarming of the entire spectrum.

The commission said the accepted proposal would give equal opportunity to all telcos to bid for spectrum, which would optimise its price realisation. However, it acknowledged that could impose a heavy burden on operators and adversely impact rural coverage and quality of services in urban areas.

Speaking to journalists after an hour-long meeting, DoT (department of telecommunications) secretary R Chandrashekhar said, "We have recommended that full refarming of the entire 900-MHz band of spectrum should be adopted. We will refer this to the EGoM, which will take the final decision on this."

Incumbent GSM operators are already up in arms but AUSPI, which represents dual technology players, welcomed the move by saying it would create a level playing field between incumbent GSM and new GSM operators. Says a worried Rajan Matthews, director general of COAI, "If the final decision remains the same, we will have no option but to challenge it before the TDSAT. After all, we will have no option to pass on the additional burden by substantially raising mobile tariffs and that will adversely impact everyone."

Following the announcement, the Bharti Airtel scrip on the Bombay Stock Exchange rose 0.93 per cent to end at Rs 270.15, while Idea Cellular dipped 0.49 per cent to Rs 80.70. But dual technology player Reliance Communication increased 3.82 per cent to Rs 61.10.

Matthews says a migration of such magnitude has not been executed anywhere in the world - moving 450 million subscribers from one spectrum band to another. According to operators, such migration could take as much as three years.

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BS Reporter in New Delhi
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