Why SC order on Airtel will also impact Vodafone, Idea users

In a major blow to the company, the Supreme Court today barred Bharti Airtel from enrolling new 3G customers in seven circles where it does not have licences, until the final order in the case is out.

And the verdict does not only impact Airtel.

The apex court also made Vodafone and Idea party to the case which means these two telcos will also not be allowed to add new 3G customers in areas where it does not have licences. In addition to Airtel, Vodafone is likely to be the most affected as both companies stand to lose voice revenues from high-end subscribers in markets where they don’t own 3G spectrum.

The department of telecom had earlier this month issued notices to both Vodafone and Idea cancelling their intra-circle roaming agreements that allows telcos to offer 3G services in circles where they do not have spectrum. DoT has also penalized Vodafone India a sum of Rs 550 crore and Idea Cellular Rs 300 crore, for violating licence norms.

However, on Tuesday, the Centre told the Delhi High Court that it will not take coercive steps against the two companies.

The top three operators-Bharti Airtel, Vodafone India and Idea Cellular-had signed pacts which allowed them to share 3G spectrum and offer services across each others’ circles, given that no operators had bought pan-India 3G spectrum in the 2010 auctions. While Bharti Airtel has 3G spectrum in 13 circles, Vodafone India owns spectrum in nine circles and Idea in 11 service areas.

What this means fundamentally, is that if a 3G subscriber moves to a different circle, where the operator does not have sufficient coverage, the subscriber can be routed automatically towards the network of another telecom operator (with whom the original operator shares the roaming agreement). But this agreement does not entitle the telecom operator to sell its services in a circle where it does not have a spectrum.

However, Bharti Vodafone and Idea are doing exactly this by offering and marketing their services in circles where they do not have 3G spectrum.

The government has noted that the sharing of spectrum across each other’s circles amounts to impermissible sharing of spectrum.

If the final SC order is on similar lines,all three firms stand to lose customers where they did not win 3G spectrum in the 2010 auctions.Together, these three telecom majors have about 12 million 3G subscribers in India. Bharti leads the pack with 6.8 million 3G subscribers, of which, 5.2 million are active users.

In the meantime, rival Reliance Infocomm obtained a court order asking Bharti to stop offering 3G services in the circles where it had not won 3G spectrum. If and when that is done, Vodafone and Idea will have to follow suit.

So who stands to gain?

Clearly it is Mukesh Amabni’s telecom venture Reliance Jio which will be launching 4G services soon. After all, it was only RIL that won won pan-India 3G spectrum, giving it the ability to offer high speed mobile broadband across the country without a roaming pact. If the government persists with its decision of treating roaming pacts as null and void, it will give Reliance an advantage against top telco Bharti Airtel, even though, it is yet to launch its services.