Telecom lobbies battle over exit policy, excess spectrum

Even as telecom regulator is dusting up a new telecom policy, shadow-boxing continues on whether one needs an exit policy for the sector.

Sindhu Bhattacharya December 20, 2014 07:37:32 IST
Telecom lobbies battle over exit policy, excess spectrum

New Delhi: A new front has opened up in the war for spectrum: an exit policy. The two sides in the game - the players using Global System of Mobile Communications (GSM) and Code Division Multiple Access (CDMA) technologies - are shadow-boxing over the need for an exit policy, primarily in the context of return of excess spectrum. And refunds,

The regulator, the Telecom Regulatory Authority of India (Trai), sees no need for an exit policy. It's view: anyone who wants to leave can do so within 60 days as long as there is no talk of refund of licence/spectrum fees already paid.

This is where the battle lines are drawn: the CDMA lobby, grouped under the Association of Unified Telecom Service Providers of India (AUSPI), says the GSM guys should disgorge excess spectrum, and hence the need for an exit policy.

The GSM lobby says it can give up extra spectrum, but they should be paid a premium for it.

The debate is generating heat just when Trai is giving final touches to a policy on spectrum allocation in the wake of the cancellation of 122 2G licences by the Supreme Court this February. Many telecom companies (telcos), specially Uninor and Sistema Shyam, lost their licences to operate in a large number circles after the SC judgement, making the framing of an extensive exit policy a necessity.

Telecom lobbies battle over exit policy excess spectrum

Uninor and Sistema Shyam, which lost their licences to operate in a large number circles after the SC judgement, have supported the idea of an exit policy.Reuters

Apart from AUSPI, Sistema and Uninor have also supported the idea of an exit policy but the GSM players - Bharti, Idea, Vodafone - have chosen to remain silent on the subject.

In its response to the Trai consultation paper on the subject (exit in 60 days without refund), AUSPI has pointed out that there are players who hold more than the stipulated 6.2 Mhz of paired spectrum. "These are primarily the incumbent GSM players who, in certain circles, have been allocated spectrum beyond the 6.2 Mhz limit. In the absence of conditions facilitating voluntary surrender of spectrum, a valuable resource would remain inefficiently allocated, ultimately harming telecom industry prospects," the association said.

A large GSM player told Firstpost that they would not oppose surrender of excess spectrum as long as the licensee was paid a market-determined price. AUSPI, of course, is not keen on giving them a spectrum surrender bounty and says any refund should be on a "proportionate" basis.

The GSM players, of course, will yell blue murder if this happens. Their argument: since the licence fees paid (which included start-up spectrum) were a nominal amount (Rs 1,650 crore), refunds that were only a proportion of this would not do them justice since they have invested crores in building a franchise. According to them, ""licence fee of Rs 1,659 crore is too small an amount for companies like ours which have made investments of billions of dollars in establishing a countrywide telecom network. We don't see the need for an exit policy".

Uninor has pointed out in its comments that spectrum and its scarcity call for an exit policy instead of just a release of licences. "There could be a situation in the new regime wherein a licensee who has purchased spectrum through an auction carried out by DoT is not able to make a success of its business, i.e. he is unable to utilise his spectrum resources efficiently. Since spectrum trading is currently not allowed, we believe that there would be a case for debating whether he should have the access to an exit policy which allows him to return the spectrum to DoT in consideration for some refund of the price paid."

Sistema has said that the Supreme Court's quashing of licences was not because of any fault of the operators or their not having fulfilled licence conditions. Hence a refund of licence fees is justified. It has also proposed that in cases where a licensee was allotted only partial spectrum or no spectrum at all, the licensee should be allowed an exit option.

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