Trai will set us back by Rs 1,50,000 crore, says GSM lobby

New Delhi: Spectrum refarming will mean incumbent GSM operators will have to invest Rs 1,25,000 crore in capital expenditure besides bearing additional costs to the tune of Rs 25,000 crore.

Emerging from a meeting with Communications Minister Kapil Sibal, the head honchos of telecom companies using Global System of Mobile Communications (GSM) technology rubbished almost all the assumptions of regulator Telecom Regulatory Authority of India (Trai) in its spectrum auction proposals. The GSM companies are vehemently opposed to the Trai proposal on refarming, which means they have to vacate the more efficient 900 Mhz spectrum band and instead bid for the less efficient 1,800 Mhz band at very high prices.

Telcos have said in the past that the 900 Mhz ‘refarming’ proposal by Trai has no connection whatsoever with the Supreme Court judgment and is also not in consonance with a technology-neutral environment and licence conditions.

Emerging from the meeting, the CEOs also asserted that there will be at least a 30 paise per minute impact per mobile consumer if Trai’s spectrum pricing recommendations are accepted, and not 1.5-2 paise, as the regulator has calculated. Bharti Airtel CEO Sanjay Kapoor, Idea Cellular Managing Director Himanshu Kapadia, Rajan Bharti Mittal and Uninor’s Rajiv Bawa were among the telecom honchos who met Sibal.

Bawa said the minister heard them out patiently but gave no assurances.

The CEOs punched holes in almost every one of Trai’s assumptions which led it to calculate this minimal impact on revenues, asserting that the actual impact would be eight times more and will almost double tariffs in some circles. To begin with, Trai has used all ‘incoming’ minutes and ‘outgoing’ minutes to reach tariff calculations when telcos says that incoming minutes are anyway regulated and only outgoing minutes should be used for calculating the tariff impact.

They also rubbished Trai’s contention that half, or 50 percent of revenues, will come from non-voice services over the next two decades. They charged the regulator with not factoring in the impact of government levies - licence fees, service tax, etc - before coming out with spectrum pricing math.

In Tuesday’s meeting, the GSM operators have questioned Trai’s assumption: that the base price for 1,800 Mhz (2G) spectrum should be linked to the 3G prices realised in 2010. Operators want the reserve price to be based on the auction price for broadband wireless access (BWA) spectrum, which is much lower and also of high value, since it can support 4G (fourth-generation) services.

While 3G operators paid Rs 3,350 crore for each Mhz spectrum, BWA operators forked out only Rs 642 crore for the same amount.

Also, another key demand of the telcos, finding an alternative way of auctioning spectrum, is already being looked into since the department of telecommunications (DoT) has asked Trai to suggest an alternative.