Indian operators' fury over TRAI's $3b grab

Nicole McCormick
17 May 2010


Bharti Airtel, Vodafone and Idea Cellular last week lashed out at Telecom Regulatory Authority of India’s (TRAI) proposals for the allocation of 2G spectrum - and their fury is understandable.


TRAI controversially proposed charging these operators for spectrum they were previously given for free beyond 6.2MHz

It suggested that a one-time fee be benchmarked against prices set at the 3G auction, which is still underway.


This spectrum above 6.2MHz was awarded on an ad hoc basis to some operators, and not others, several years ago.


Now TRAI is trying to make amends for the fact that in a lot of circles Bharti and Vodafone are using 10MHz of spectrum at 900MHz.


TRAI estimates that Bharti will have to find 34.98 billion rupee ($776.5 million) for spectrum it has been given above 6.2MHz. BSNL, Vodafone and MTNL will have to chip in a cool 30.4 billion, 28.49 billion rupee, 26.7 billion rupee, according to the estimates.


“There is no need for anxiety,” TRAI chairman J.S. Sarma said. “The payout for each of these four companies [is] not much.”


Not much. That’s a total of 120.5 billion rupee, or a cool $2.7 billion, to compensate for the government’s past mistakes.


But there’s more.


Under its refarming proposition, TRAI proposes that operators swap their 900MHz spectrum for an equal amount of spectrum at 1800MHz.   After an operator moves to 1800MHz, the DoT will take the vacated 900MHz spectrum and auction it for either 2G or 3G purposes.


So for Bharti, if it has 10MHz at 900MHz, it can swap this for 10MHz at 1800MHz.


But it will first have to pay for excess spectrum above 6.2MHz and it will have to find additional capex if it wants to maintain its existing service levels (since it will need to deploy more base stations at 1800MHz than it had at 900MHz).


Then, at a new auction, it can opt to bid for the 10MHz of spectrum that was vacated at 900MHz.


In a statement, Bharti said TRAI’s recommendations “overturn all existing policies of Department of Telecommunications for the last 15 years, recommendations made by various government committees and even TRAI’s own earlier recommendations.”


“Besides, these are against all existing global norms for spectrum allocation and efficiency.”


Fighting words. If the government wants to lay its hands on $3 billion it’s going to have to take on the entire industry.


Nicole McCormick

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