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The refarming of spectrum is estimated to emerge as a business opportunity worth over $10 billion or more than Rs 62,000 crore for the telecom equipment makers.
While operators are worried about the incremental expenses that they will have to make for network infrastructure, this would actually bring business to vendors like Huawei, ZTE, Ericsson, Nokia Solutions and Networks (NSN), Alcatel Lucent. This will also result in better tenancy for the 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 900MHz 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 — 1800MHz, which is less efficient, for spectrum.
To offer services in 1800MHz 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% more sites to cover the same area with 1800MHz spectrum as compared with the similar quantity of spectrum in 900MHz 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% for urban or dense urban areas. For rural it still remains at about 50-70% 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 amongst 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 (COAI), which lobbies for incumbent GSM operators like Bharti Airtel, Vodafone India and Idea Cellular, has earlier communicated to the Department of Telecommunications (DoT) 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 900MHz 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 (Trai).
“Existing operators with 900MHz band spectrum will definitely fight to retain spectrum in this band. But, there is a possibility that companies may shift to 1800MHz band mainly for voice, while 900MHz may be used for only data. Also, availability of spectrum is limited in 900MHz band, while the Government has already announced that 403MHz would be auctioned in 1800MHz 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 about that the forthcoming auction that includes refarming would turn into a good opportunity for the equipment makers. However, a number can not 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.
While tower infrastructure providers did not want to comment officially, a top-executive at one of the leading tower company said that the industry as a whole expects the tenancy to grow up to more than 2, from the present average of 1.7 after the forthcoming auctions. However, a better estimate can be made once the auction is over, added the executive.
