Spectrum Refarming: Bharti, Vodafone, Idea To Be Hit

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The recommendations to be put before EGoM tomorrow for final decision

In a move that is being widely opposed by the GSM players, Telecom Commission, the highest decision making body of Department of Telecom (DoT), on 17 October recommended existing operators surrender the entire spectrum in 900 MHz band at the time of their licence renewal in 2014.

This will mean that all the 900Mhz band that older operators—including Bharti Airtel Ltd, Vodafone India Ltd, Idea Cellular Ltd, state-owned Bharat Sanchar Nigam Ltd and MTNL — have been using will be replaced with spectrum in the 1,800Mhz band once their licences come up for renewal, increasing their costs by $24 billion (approx Rs 1.24 lakh crore) in capital outlay.

  “The entire spectrum in 900 MHz will be refarmed,” said telecom secretary R Chandrashekhar.

 Market leaders Bharti Airtel Ltd and Vodafone’s India unit — two of the country’s oldest carriers — will be hit the most by the proposed refarming or substituting of their more efficient 900 MHz band airwaves with inferior quality 1800 Mhz band airwaves starting in November 2014.

This would mean the carriers will have to buy the replacement airwaves in an auction, and also have to build more mobile masts and replace some of the existing gears to continue services.

The spectrum switch will force operators to write off a total $4.7 billion of assets, as some of their existing equipment becomes obsolete, the Cellular Operators Association of India (COAI) said in May.

The telecom secretary said three different options were put before the commission, which included refarming (or redistribution of airwaves held by existing players) of all airwaves held by incumbents, or allowing the operators to retain either 2.5 Mhz or 5 Mhz of airwaves frequencies in 900 Mhz band.

The recommendations of the commission will now be put before the empowered group of ministers (EGoM) headed by Finance Minister P Chidambaram for a final decision.

 The EGoM is likely to meet on 18 October.

Chandrashekhar said the existing operators will be allowed to bid in the auction of 900 MHz band, which is likely to take place in the first half of 2013. If they are successful, they can retain the spectrum, he said.

However, if the incumbents fail to win the spectrum, they will be given 18 months to move to 1800 MHz for which an equivalent amount of spectrum will be made available for them in the new band.

“…if the same operator succeeds, he will retain it, if a new person succeeds, than the existing operator has 18 months to make his alternative plans and the new operator will have 18 months to put his infrastructure in place before he gets the spectrum,” Chandrashekhar said.

The licences of existing players for metro circles are coming up for renewal in November 2014 and for other circles in 2015 and 2016.

The government has in-principle approved the concept of spectrum refarming under which old operators like Bharti Airtel and Vodafone have to surrender spectrum allocated in 900 Mhz band (being used for 2G services which gives wider coverage) on expiry of their licences.

The base price for 900 Mhz band spectrum is proposed to be charged at double the price of 1800 Mhz spectrum band.

The government had allocated spectrum in 900 Mhz band to companies from 2001 for Rs 1,658 crore for pan-India services.

Telecom companies have been against refarming, saying it may result in call rates going up by as much as 64 paise a minute. 

The Telecom Regulatory Authority of India (Trai) has proposed allowing players, including existing operators, to bid for these spectrum at new prices.

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