[economic times] All leading GSM operators will have to give up 'excess' airwaves they have when their mobile permits come up for renewal beginning 2014. This implies companies such as Bharti Airtel, Vodafone Essar and Idea Cellular, among others, which currently have up to 10 MHz or units of 2G airwaves in many regions, will be given only 6.2 units of radio frequencies when they renew their permits, according to a telecom department internal note reviewed by ET. Besides, telecom companies will also have to pay market rates for this 6.2 MHz of airwaves in every region when they renew their licences.
This has already been communicated to all mobile phone companies. "On renewal, spectrum is to be assigned maximum up to the prescribed limit. Value of spectrum to be paid separately," said a telecom department's letter that was sent to all service providers last week. Communications minister Kapil Sibal would be engaging the industry in a full-fledged discussion beginning this week.
At present, telcos hold separate permits for each of the 22 circles in the country and these are valid for a period of 20 years. The government gave away mobile permits from mid-90s. About 11 mobile phone companies will have to renew their permits between 2014 and 2021.
These developments come even as GSM operators maintain they don't hold any 'excess' airwaves. India's telecom sector has been mired in a controversy regarding the pricing of 'excess' second generation spectrum, used for basic mobile services since 2008. These companies - notably Bharti Airtel, Vodafone Essar, Idea Cellular and BSNL - claim that mobile permits entitle them to 15 units of 2G airwaves in every region, and add that there is no capping of airwaves at the 6.2 MHz limit.
The government is yet to decide on methodology to calculate the market value of spectrum when mobile permits are to be renewed. But, sector regulator Trai had recently prescribed that every MHz of 2G airwaves up to 6.2 MHz limit be priced at 1,769.75 crore. If the government accepts Trai's proposal, then a company such as Bharti Airtel will have to shell out a total of 10,972.45 crore for renewing its mobile permits from 2014-15 onwards.
A top executive with a GSM operator said that department's methodology and payment structure for licence renewal were only at the discussion stage, while adding that the proposal sent to service providers was nowhere close to being the final policy.
While mobile operators are set to protest any policy changes that will force them to couch up huge amounts for renewal of their permits, the regulator's latest proposals, if accepted, will be far more economical for the industry, when compared to its earlier recommendations on this issue. This is because, in May 2010, Trai had suggested telcos pay market rates for 2G airwaves during licence renewal, and added that this be based on the 3G spectrum price in last year's auction along with an additional 3% compounded interest for every year from then until the date of renewal.
Under that methodology, RCOM would have had to shell out the maximum at 20,729 crore, for GSM and CDMA renewal, followed by Bharti Airtel ( 20,689 crore) from 2014 to 2021. Vodafone would have to pay 18,087 crore, Tata Teleservices 12,850 crore (for GSM and CDMA) and MTNL 12,825 crore.
For India's beleaguered telecom sector, which shelled out more than 1,05,000 crore last year for 3G and broadband airwaves, renewal of mobile permits is just one of the many costs confronting the industry. The 14-players ultra competitive mobile market that is fighting stagnant revenues and plunging profits over the last 18 months due to the savage price war, may also have to pay for all additional 2G allocations through an auction process.
Additionally, the industry will also have to shell out 17,513 crore if government accepts Trai's recent recommendation that mobile phone companies be charged a one-time pan-India fee of 4,572 core for every unit of airwaves they hold beyond the contracted limit (6.2 MHz).
GSM operators to surrender excess spectrum during renewal in 2014