Refarming 900 Mhz: Bharti, Idea, Voda will have to pay a bomb
There is some reprieve for incumbents as the EGoM had decided to let them retain part of their 900 Mhz spectrum. But this could make the 1,800 Mhz auction weaker.
New Delhi: Incumbent telcos such as Bharti Airtel, Vodafone and Idea Cellular have been holding their breath on the issue of refarming of 900 Mhz spectrum. But today's decision of the Empowered Group of Ministers (EGoM) may bring some relief to these telcos.
The EGoM has decided to let those telcos who currently hold 900 Mhz spectrum retain upto 2.5 Mhz of it but anything above 2.5 Mhz will have to be surrendered.
Though the retained 2.5 Mhz will cost a bomb - it will be priced at an auction-determined price and will, therefore, be quite expensive - telcos should be happy that they will be able to maintain connectivity and avoid total disruption of services which was being envisaged when the Telecom Commission had earlier recommended that all of the 900 Mhz spectrum held by telcos needs to be surrendered.
Jaideep Ghosh, Partner at KPMG, told CNBC-TV18 that today's EGoM decision may result in subdued bidding in the upcoming 2G auctions where telcos will bid for 1,800 Mhz spectrum. "If only partial refarming is being done, telcos would be less aggressive in the upcoming auctions."
Why should they spend money to acquire the less efficient 1,800 Mhz spectrum when they have been allowed to retain some of the much more efficient 900 Mhz?
Bharat Bhargava, Partner (telecom) at E&Y, told the channel that financial impact on telcos would be geography-specific. Earlier, when full refarming had been decided upon, the GSM lobby Cellular Operators Association of India (COAI) had suggested that this decision would mean GSM operators would have to shell out Rs 60,000-70,000 crore.
Refarming means incumbent telcos surrender spectrum in the 900 Mhz band - said to be a very efficient band for data - as licences in each circle come up for renewal. They will then have to bid for the same spectrum at new, much higher prices. Else they could bid for the less efficient 1,800 Mhz band in the upcoming auctions.
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Will tariffs rise and telcos end up with loads of debt on balance-sheets after the high-bidding spectrum auction? Probably not. Most probably, the high bid prices will hasten a consolidation in the industry
The government will decide only after November auction on how much quantity of spectrum telecom operators can retain when they surrender the airwaves at the time of licence renewal in 2014.
On Wednesday, the Telecom Commission will consider three options for refarming 900 Mhz spectrum.