New Delhi: This could prove to be a double whammy for GSM biggies Bharti Airtel, Vodafone and Idea, as also Reliance Communications (RCom).
Not only will they be paying more than anticipated amounts for the excess spectrum they hold in the 2G space, they will now have to surrender all spectrum held in the more efficient 900 Mhz band at the time of licence renewal. The Telecom Commission today recommended that telcos should give up all spectrum in the 900 Mhz (which is far superior to the 1,800 Mhz band, though both are used to offer 2G services) at the time of licence renewal.
The GSM operators have already registered their opposition to the move earlier, saying this will not only hurt their balance-sheets but also prove to be problematic in providing coverage. According to agency reports, the industry has estimated that this move—which is known as refarming of spectrum, where the more efficient spectrum is being recalled and telcos will have to bid for it at new, significantly higher, prices—will cost existing telcos about $24 billion in capital outlays.
The Telecom Commission’s recommendations will now go to the Empowered Group of Ministers (EGoM) headed by Finance Minister P Chidambaram before they are finally notified. According to back-of-the-envelope calculations, Bharti and Vodafone will be hit the most by these recommendations (if they are approved by the EGoM) since they hold more spectrum in the 900 Mhz band and that too in A circles.
Bharti, as per our calculations, may need to surrender 8 Mhz in Delhi and 6.2 Mhz in Kolkata circles by 2014. Vodafone may have to surrender 8 Mhz each in Delhi and Mumbai and 7.8 Mhz in Kolkata by next year, whereas Loop Telecom may have to give up 9 Mhz in Mumbai. For 2014, neither Idea nor Reliance Communications need to worry on surrendering any 900 Mhz spectrum.
But overall, 46 Mhz of spectrum in the 900 Mhz band needs to be surrendered by the two biggest GSM telcos next year. An official with a leading telco said that earlier the Department of Telecom (DoT) wanted telcos to surrender 900 Mhz spectrum much earlier than when the relevant licenses were expiring and this would have created issues of coverage. “But now, from what I have heard on today’s TC decision, the spectrum has to be surrendered only at the time of licence renewal. This eases the situation significantly since now, 900 Mhz will be reallocated only through auctions,” an official of leading telecom firm told Firstpost on condition of anonymity.
Sector regulator Telecom Regulatory Authority of India (Trai) has recommended that 900 Mhz spectrum be priced twice as high as the 1,800 band, for which the reserve price has been fixed at a steep Rs 14,000 crore for each block of 5 Mhz.
The news agencies quoted a report by the Cellular Operators Association of India (COAI) in May to say earlier today that the spectrum switch (if telcos can afford to buy only the less efficient 1,800 Mhz spectrum in the upcoming auctions instead of going for the more expensive 900 Mhz) will force operators to write off a total $4.7 billion of assets, as some of their existing equipment becomes obsolete.
Meanwhile, as per our calculations, the maximum impact on telcos will come in 2015, when in all 149.8 Mhz of spectrum will have to be surrendered. Bharti alone needs to return 26.2 Mhz of 900 Mhz spectrum in the circles of Andhra Pradesh, Himachal, North East and Punjab; Vodafone may have to surrender 38.8 Mhz in the circles Gujarat, Kerala, Maharashtra, Rajasthan, Tamil Nadu and UP (East).
Reliance Communications may have to give up spectrum in six circles—Assam, Bihar, Himachal, Madhya Pradesh, North East and West Bengal—which totals to 39.8 Mhz—while Idea may have to give up 45 Mhz in seven circles of AP, Gujarat, Haryana, Kerala, Madhya Pradesh, Maharashtra and UP (West).