Policy windfall for RCom

The new set of rules for granting telecom licences and allocating spectrum announced today changes the telecom landscape dramatically.

In a nutshell, the rules mainly benefit Reliance Communications, which did not waste time after being granted the dual-use right late on Thursday night. The company today paid up the mandatory Rs 1,651 crore and joined the queue of operators seeking spectrum.

According to some analysts, Reliance has vaulted ahead of others in the queue and now stands a "rock-solid" chance of getting spectrum earlier than expected.

This is because DoT today said that it would consider allocation of spectrum from the "date of payment of the fees". Reliance did that today and is therefore ahead in the list of applicants.

But some analysts disagree with that. Because by the same logic the other CDMA operator Tata Teleservices acquired the right to have GSM spectrum in a similar manner. Given the value, the company could decide to do so, further pushing down existing applicants down the list, they said.

Another question that comes up is the fate of applicants who are in queue.

According to one analyst, since none of the applicants have been granted the initial letter of intent by DoT, and therefore have not paid up the fees, they are now behind those (read Reliance) that have paid.

This change of fortunes overnight impacts even the leader on the list, Russia's Bycell, which has been at the head of the list of 46 applicants since January 2006.

The only silver lining for some GSM operators is that Idea Cellular (two circles) and Maxis Aircel (14 circles), along with Vodafone (six circles), which have paid up the money and got the license, but not the spectrum, can get the initial 4.4 MHz allotment of GSM spectrum, provided Tata Teleservices does not jump into the fray.

All GSM operators will have to first increase their user base to qualify for additional spectrum, a process that would take a few years, delaying their expansion plans and perhaps losing out on market share, even as Reliance Communications expands its GSM services nation-wide.

There are other implications, which rival GSM and CDMA camps interpret differently.

Bharti Airtel seems to be the single biggest loser of a policy that provides no assurances of when it will get additional spectrum for its nation-wide operations. Vodafone Essar, which is awaiting additional spectrum in 16 circles, faces a similar prospect.

In any case all GSM operators will have to fork out more money for the spectrum. Each additional MHz would cost Rs 16 crore in the four metros and category A circles, Rs 8 crore in category B and Rs 3 crore in category C circles.

Given their current profit levels this should not be much of an issue. But what has rankled operators the most is that DoT has changed the rules once again.