Spectrum dearth prompts licence scramble

Swarm of established players have applied for unified access service licences

Cashing in on the high valuation of telecom companies that have spectrum allotted to them, a swarm of established players and little-known entities have applied for unified access service licences (which allow operators to offer mobile, Interent and fixed-line services).

Some 74 applications for these licences for mobile services are pending with the department of telecom. 

SPHERES OF INTERESTS
Company	Circles applied for
HFCL Infotel	21 circles
Bycell Telecom  India	Assam, Bihar, North-East,  Orissa & West Bengal
Swan Telecom  Pvt Ltd	14 circles
Cheetah	Assam, North-East
Spice Telecom	20 circles

The applicants range from telecom players like Spice Telecom, a small player that recently raised money in the stock markets, and Himachal Futuristic, a company that runs fixed-line services in Punjab, to little-known entities like Swan Telecom and Cheetah Corporate Services.

Himachal Futuristic, which faced a financial crisis some years ago following an audacious bid of over Rs 85,000 crore for licences in nine circles, has bid for 21 unified access service licences (UASL) out of the country's 23.

Bycell Telecom, a company with Switzerland-based investors, has bid for five, including less-profitable circles like Assam, Bihar, the North-East, Orissa and West Bengal.

Likewise, Cheetah Corporate Services and Swan Telecom have applied in two and 14 circles, respectively. Spice Telecom has applied for 20, which will make it a pan-India player. It currently operates in Karnataka and Punjab.

Since telecom licensing norms were changed in 2003 to allow for universal access (before which licensing was linked to the technology used), the government has granted over 97 UASLs in the country's 23 circles.

Current rules bundle a UASL with a government commitment on spectrum provision "" up to 4.4 MHz of spectrum and 2.5 MHz for CDMA operators. Given the current shortage, which is likely to worsen with the fast pace of subscriber additions, a UASL also commands a high valuation.

A pan-India licence costs Rs 1,500 crore but a company with spectrum in all the circles will be valued three to four times that.

Not surprisingly, the rush in to mobile services is worrying incumbents. Some 16 applications for additional spectrum are pending from leading players like Reliance Communications, Bharti and Idea.

"We encourage competition, but what we are saying is, give it first to us before the new applicants," said a member of the Cellular Operators' Association of India, which represents the GSM lobby.

"We are aware of the problem and surely will not allow anyone to trade in spectrum," said a department of telecommunications official.

Accordingly, the government is looking at various options. One is to cap the number of operators (which already ranges from five to eight in each circle). Another is to add a clause that the company holding the spectrum cannot be sold for five years.

DoT hints at pricing policy review

The department of telecommunications (DoT) has hinted at changes in the spectrum pricing policy by setting up a four-member committee that will "review the present spectrum charges based on revenue share" to optimise the use of this scarce resource.

The committee will be headed by DoT Deputy Director General (wireless planning, finance ) HP Mishra and will include three other members from the DoT. It will submit its report in six weeks.

Spectrum shortage is becoming a key issue for telecom companies, with monthly mobile subscriber numbers growing at 7 million, up from roughly 3 million a year ago.

An operator is allotted additional spectrum once it reaches a certain subscriber base. The spectrum is paid for by increasing the government's revenue share.

While the country's six GSM-technology operators do not want a change, competitors Reliance Communications and the Tatas, the only two to use the rival CDMA mobile technology, have demanded a new criterion that will include auctioning spectrum for both second-generation (current) and third-generation (which allows faster access) services.

Under the terms of reference, apart from reviewing spectrum charges, the committee will also look at differential pricing for various parts of the spectrum band based on demand levels and on use in different areas (big cities, urban and rural). It will also examine the need to encourage spectrum use in rural areas.