Suggests pegging 2G fee to 3G pricing, lifting M&A restrictions; vetoes 2G auction for now.
The Telecom Regulatory Authority of India (Trai) today recommended that operators not be given free spectrum beyond 6.2 MHz when their licences came up for renewal, but must pay market rates based on 3G prices, a move that would hit established players like Bharti Airtel and Vodafone.
The licences of many companies, including Bharti Airtel and Vodafone, in some circles are due to expire in 2014.
The regulator also recommended that operators, with spectrum in the 900 MHz band, should be shifted during licence renewal to the 1800 MHz band so that it could be used for 3G services.
Admits a Trai official: “It is a difficult proposition and, of course, it involves costs as they have to shift to a new band, requiring new equipment, and they have to be compensated, on which there will be consultations.”
The regulator also suggested a committed spectrum limit of 6.2MHz for GSM players. Beyond 6.2MHz, the operators would be charged based on 3G auction price. Bharti Airtel, BSNL and Vodafone Essar have 10MHz in many circles.
The regulator also proposed to do away with existing subscriber-linked criteria and came up with a new formula for paying spectrum charges beyond 6.2MHz. Under the new formula, GSM operators will pay the same price discovered in 3G auction for spectrum beyond 6.2 MHz, while CDMA operators will have to pay the same beyond 5MHz. The price would be calculated on a pro rata basis for the remaining licence period.
Rajan S Mathews, director general of Cellular Operators Association of India (COAI), said, “The growth of telecom industry will be hampered. We are very disappointed with Trai’s recommendations. Foreign investors will now have to rework their business plans after this.” Both Vodafone Essar and Bharti Airtel declined to comment.
A senior executive at a leading operator said: “The recommendations have unfairly treated incumbents who would come up for renewal of licence by putting in so many burdens on them. It will surely stifle their growth.”
Sushil Sharma from BRICS Securities echoed similar lines: “These recommendations will have a negative effect on telecom companies. The government had committed to these companies that spectrum allocation will be based on the number of subscribers. Now, it says that you have to pay for spectrum.”
Reliance Communications, however, said the recommendations would have minimum impact on it. “We have excess spectrum only in Bihar and the impact is not significant. The impact would be to the tune of Rs 22 crore as per current 3G auction closing price,” said Syed Safawi, CEO-Wireless Business, Reliance Communications.
Tata Teleservices said a level playing field had not been maintained. “The recommendations, instead of recognising our status as a dual-technology UASL-holder, has rather pushed us further behind in the queue, as it proposes to award spectrum first to those players who already have 4.4 MHz to 6.2 Mhz and then to those who have been waiting. The recommendations thus impacts TTSL adversely and makes our case of expecting minimum spectrum the worst in the industry,” it said in a statement.
Going by the ongoing 3G auction, a pan-India licence is already valued beyond Rs 13,000 crore for 5MHz of spectrum across the country. In striking contrast, operators paid only Rs 1,650 crore for a pan India 2G licence that comes with 6.2 Mhz. The regulator also decided not to go ahead with 2G auction.
Trai also recommended the removal of three-year lock-in period for mergers and acquisitions. It also suggested paying of one-time fee for spectrum beyond 6.2MHz, which is likely to impact existing operators such as Bharti Airtel, Vodafone Essar and BSNL.
According to the mergers and acquisitions guidelines laid down by Trai, the total spectrum held by the combined entity would not go beyond 14.4MHz/10MHz (for GSM/CDMA). It will also have to pay for the spectrum beyond 6.2MHz.
The promoters, whose net worth has been taken into consideration for grant of licence, will have to keep a minimum 51 per cent stake in the company for five years.
“We are clearly saying we should consolidate. We are not mandating consolidation but facilitating it. Our recommendations are clearly in that direction,” Trai Chairman J S Sarma said.
However, Trai said there should be restrictions on mergers that would result in the combined firm getting over 30 percent of the total subscribers or revenue in any circle.
Further, Trai said the mobile operator would have to cover at least 10 per cent of district headquarters in the first year and 50 per cent within three years of the effective date of licence.
“The present rollout conditions are very lenient and urban-centric as even after 15 years of introduction of mobile services, the rural teledensity is below 25 per cent,” Trai said.
If a service provider fails to fulfill the rollout obligations, then it would entail penalty in the form of additional spectrum usage charges. New operators with start-up spectrum of 4.4 MHz will be given priority in allocation of additional spectrum up to 6.2 MHz, as against operators who have not received any spectrum at all. However, the allocation of the additional spectrum will come at a market-driven price and on stiff new rural rollout obligations.
