April 07, 2020
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A Few Rings Of Fury

A wider band will ease up things, but a din is drumming up

A Few Rings Of Fury
Illustrations by R. Prasad
A Few Rings Of Fury
outlookindia.com
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Shrill & Mute
  • With 5 million subscribers being added every month, existing telecom operators are facing a spectrum crunch
  • Many among the 575-odd applicants for licence have no telecom experience, and may not be serious players
  • The telecom body has served legal notice to the government for releasing spectrum to BSNL on the quiet

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The buzz of action, it seems, never stops in the Indian telecom sector. The government, which has high hopes from the fastest growing sector of the economy, is currently sitting in a spectrum muddle of its own creation, while major telecom players are mulling legal recourse to address their urgent need for more bandwidth.

The distribution of spectrum—the band of airwaves required for running telecom services—has always been a contentious issue as the telecom operators and the government rarely agree on its whys and hows. India, as one of the world's fastest growing telecom market, has a telecom subscriber base that is currently pegged at over 240 million. Of this, the GSM industry alone accounts for over 150 million subscribers. On an average, over five million subscribers are being added every month. The government, on its part, is yet to firm up how it would distribute the scarce spectrum. This has left existing players grappling with how to expand the subscriber base as their networks are bursting at the seams due to overload. In August, the Telecom Regulatory Authority of India (TRAI) recommended against auctioning of spectrum, thereby opening the door for issuing of spectrum along with new Universal Access Service Licences—a practice that has been debated in detail. According to the current thinking, all new licencees would get 4.4 MHz of spectrum worth about Rs 5,000 crore with their licences by paying a small licence fee of around Rs 1,600 crore or the price paid by the 4th mobile service licence holder when it came into the sector.

Expectedly, the government has been bombarded with applications—around 575 of them. And they aren't just from seasoned players like AT&T (which was a partner in Idea Cellular), the Tata and the A.V. Birla Groups, but also from a number of companies who are in totally unrelated businesses. These include several top construction firms like DLF, Omaxe, Indiabulls Real Estate, Unitech and Parsvanath, and steel companies like JSW Steel. Many of these companies have little or no experience in telecom. The Department of Telecommunications (DOT) could take a few months to wade through the applications to figure out who all qualify for the fest, considering the number of applications and parameters it has to pit them against.

Understandably, the existing players are unhappy with the way things are moving, and feel that the government's new strategy will put them at a disadvantage and lead to trading of licences and scarce spectrum. Says T.V. Ramachandran, director general, Cellular Operators' Association of India (COAI): "The deluge of applications is because the TRAI recommendations on spectrum are completely flawed and based on wrong assumptions. This has made it easy for new players to fit into the scenario easily. Because of this, existing players will not get anymore spectrum despite being efficient users."

Agrees Neha Gupta, senior telecom analyst with Gartner India: "By giving spectrum to non-telecom companies, the government will forcibly make it a tradeable commodity." Trading of licence and spectrum at a high price is inevitable looking at the high growth in the sector, say experts, who feel there would be no dearth of takers.

The COAI has already shot off two letters to the DOT secretary and chairman, Telecom Commission, D.S. Mathur—on October 5 and 9 respectively—expressing its views on TRAI's subscriber-linked criteria for spectrum allocation for mobile operators. The existing players say they may also go to court if the government proceeds with the current strategy on spectrum. Points out a top official with a prominent service provider: "We are readying ourselves to go to court if the situation continues like this because this strategy will put existing players at a tremendous disadvantage and we will not take it lying down."

COAI also claims that while the existing private sector players have been waiting to get spectrum, the government has quietly issued spectrum to Bharat Sanchar Nigam Limited (BSNL). Says Ramachandran: "BSNL has been given spectrum despite not being qualified for it in several places." According to COAI, the government has given BSNL spectrum in the 1800 MHz in 17 different circles from as early as March this year even as other players waited to get it. COAI served a legal notice on the government earlier this month on this issue. The industry body is also planning to seek legal intervention if the government comes out with a new spectrum policy in line with TRAI's August recommendations of a subscriber-based spectrum allocation policy instead of allocating it through auction process.

This has put the government in a tricky situation because if it goes back on the TRAI recommendations on the basis of which it received the barrage of applications, it is likely that the new applicants would move the court as well. Experts have also questioned the need for bringing in more players in the Indian telecom sector in the first place. This is primarily because most of the big and healthy telecom markets in the world have three to four players—a state India has already achieved. Moreover, Indian telecom tariffs are arguably the lowest in the world while the ARPU (average revenue per user) has been abysmally low and declining. Says Neha: "There should be a restriction on the number of players. Competition in the market is adequate. There is no serious pressure or argument to increase it."

With ARPU and tariffs hitting rock bottom, none of the players, except Bharti Airtel, has been able to break even till date. This leaves very little room for newcomers to manoeuvre. In such a situation, only people with non-telecom plans would come into the sector, point out experts. But the government, which has set itself a stiff target of 500 million subscribers by 2011, does not seem ready to relent. Its apparent plans not to restrict the number of players in a circle may lead to duplication of infrastructure in most circles and put undue cost pressures on new players.

However, something not to be overlooked is that some of the new players have started looking at rural areas which have largely been neglected by existing operators. Thus, opening the door to new players may not be such a bad idea. Particularly, as Indian subscribers can now look forward to some cheaper and better telecom services with more competition in the field.
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