Spectrum refarminge: Equipment makers see $10-bn business

The refarming of spectrum is estimated to emerge as a business opportunity worth over $10 billion, or more than Rs 62,000 crore for telecom equipment makers.

While operators are worried about the incremental expenses that they will have to bear for network infrastructure, this would actually bring business to vendors such as Huawei, ZTE, Ericsson, Nokia Solutions and Networks (NSN), Alcatel Lucent. This will also result in better tenancy for tower infrastructure providers like Bharti Infratel, Indus Towers and Viom Networks.

In the process of refarming of spectrum, GSM operators will have to surrender their spectrum in 900-MHz band when their licences are due for renewal, and they can either buy it back in the auction, or they have the option to shift to another band - 1,800-MHz, which is less efficient, for spectrum.

To offer services in the 1,800-MHz band, operators will have to make fresh investments for network upgradation and technology for proper connectivity. This would require more base stations, network boosters and other equipment, which in turn would mean better tenancy for the tower companies.

According to Sameer Rawal, Director (Marketing), Huawei India, operators would need about 70 per cent more sites to cover the same area with 1,800-MHz spectrum as compared with the similar quantity of spectrum in the 900-MHz band. "But for urban and dense urban areas, these requirements are offset by capacity sites. With capacity in consideration, the site difference is reduced to maximum 20 per cent for urban or dense urban areas. For rural, it still remains at 50-70 per cent site difference. While the real numbers can only come out after auction, our optimistic estimates advises us for a $10-billion opportunity to be shared among all equipment makers over the next few years," he added. Citing a study by Analysis Mason, Rawal further said that incremental burden for operators would be about Rs 54,739 crore in case no operator is able to retain existing spectrum.

The Cellular Operators Association of India, which lobbies for incumbent GSM operators like Bharti Airtel, Vodafone India and Idea Cellular, has earlier communicated to the Department of Telecommunications that refarming of spectrum would cost GSM operators about Rs 1.25 lakh crore in incremental investment and about Rs 25,000 crore in equipment write-off, excluding the cost of the spectrum.

Interestingly, 35 licences with 230-MHz of spectrum holding in the 900-MHz band in 21 circles will be due for renewal between November 2014 and 2016, according to data available with the Telecom Regulatory Authority of India.

"Existing operators with 900-MHz band spectrum will definitely fight to retain spectrum in this band. But, there is a possibility that companies may shift to the 1,800-MHz band mainly for voice, while 900-MHz may be used for only data. Also, availability of spectrum is limited in the 900-MHz band, while the government has already announced that 403-MHz would be auctioned in the 1,800-MHz band," said an analyst with a management consulting firm. There may not be aggressive bidding. Thus, spectrum could be acquired at a lower cost, but operators will have to invest in network infrastructure more, added the analyst.

"We are optimistic that the forthcoming auction that includes refarming would turn into a good opportunity for the equipment makers. However, a number cannot be quantified before the auction," said Ranjan Sharma, Director (Technical and Commercial), ZTE India.

"Refarming in India needs to be looked through in fair amount of detail from financial, network and technology and consumer impact aspects. Given the small chunks of spectrum that operators have, 900-MHz band refarming is probably not even fully feasible as thought of. While it may be an opportunity for us to sell more to the industry, it is not a positive event to happen," said a spokesperson at NSN.