Trai spectrum move to result in $600 mn capex

The new spectrum allocation proposal by the Telecom Regulatory Authority of India (Trai) will result in an additional capital expenditure of $600 million in the next four years. This would be due to spectrum squeeze to be felt by the service providers in urban areas, according to Lehman Brothers.

"The Trai spectrum criteria revision will force operators to raise capex in urban areas. We estimate $600 million additional capex over four years across the top 34 cities (25 per cent increase in BTS), where the spectrum squeeze could be the most under the new norms," the global research and analysis firm said in a study.

Lehman Brothers rated the likelihood of implementation of Trai's proposals as "medium to high", as the proposals resolve several regulatory issues in one go. If implemented, the biggest beneficiaries would be smaller operators and new applicants leading to significant mergers and acquisitions in the country.

It expects 20 MHz of spectrum to be allocated by the first quarter of 2008, as it is believed that the telecom ministry is in the final laps of negotiations with the defence ministry for releasing spectrum. The ministries have agreed to sign a memorandum of understanding (MoU) for vacating spectrum across 50 key locations in the country by December this year.

Allocation of spectrum to operators would also not be an issue, with the queue among the incumbents and the letter of intent (LoI) holders not becoming an issue.

GSM major Bharti Airtel would be provided spectrum in the Delhi, Mumbai, rest of Maharashtra and West Bengal circles, while Vodafone-Essar would get it in all the 'C' circles. Idea Cellular would be offered spectrum in Mumbai and Bihar, Aircel in Delhi, Mumbai, Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Kerala, Punjab, Haryana, Uttar Pradesh (West), Uttar Pradesh (East), Rajasthan and Madhya Pradesh.

The implementation of the new recommendations would lead to a reduction in Indian wireless attractiveness, as it will curtail existing operators' ability to qualify for new spectrum in every circle.

This would result in a likely increase in the number of operators in every circle, including that of new licensees. Some of the operators would not be able to bring in adequate funds, which would create enough pain-value for larger operators for their spectrum-worth, it said.