The Hindu Business Line : Truce eludes telecom

The Communication Minister, Andimuthu Raja, knows exactly what to do when he has a sore throat — eat spicy, home-cooked crab. But he has a bigger pain these days — an aggravated and prolonged battle for spectrum between GSM and CDMA mobile operators — for which he and his officials in the Department of Telecom are finding it tough to cook up a solution.

It all began on October 18. Top officials belonging to the Department of Telecom were working unusually late that day.

After a three-hour-long marathon meeting, at around 9 p.m., they summoned waiting executives from Reliance Communications into their chambers in Sanchar Bhawan and handed them a letter that permitted the largest CDMA player in the country to simultaneously roll out GSM-based mobile services across the country.

The next day, after Reliance paid Rs 1,651 crore as fee for its newly acquired GSM licence, the Ministry of Communication decided to make its decision public.

Along with giving nod to Reliance’s GSM plan, the Ministry also decided that existing GSM operators, including Bharti Airtel and Vodafone, would have to rope in more subscribers if they wanted to be eligible for additional spectrum.

These two decisions have taken the telecom sector right into the middle of yet another fiercely fought battle.

On one side are the three largest private GSM operators in the country — Bharti Airtel, Vodafone Essar and Idea Cellular, which are opposing the Communication Ministry’s policy and on the other side is Reliance Communication, supported by smaller players such as HFCL and Shyam Telecom who stand to benefit from the decisions announced on October 19.

GSM group peeved on 2 counts

The GSM operators are peeved on two counts. First, that the subscriber numbers prescribed by the Telecom Engineering Centre (TEC) — the technical wing of DoT — to be eligible for additional spectrum will put all the existing operators out of reckoning for more radio waves.

In some circles, the subscriber base levels set by the Government are up to 15 times higher than the current benchmarks, which means neither Airtel nor Vodafone can expect to get more spectrum for 2G mobile services.

“We would not claim to be experts in our sector, but can certainly claim some degree of knowledge to challenge the absurd proposed spectrum allocation which has been put forth by TEC.

The outcome of the hurried exercise at TEC is a sad commentary on how international and time-tested norms for spectrum allocation are being ignored,” says Sunil Bharti Mittal, Chairman and Managing Director, Bharti Airtel.

With less quantity of spectrum, the GSM operators will be forced to put in more capital expenditure to accommodate the growing subscriber base. This, in turn, could have an impact on their valuations as, in India, getting additional spectrum under current subscriber levels is far cheaper than increasing capital expenditure to meet the new spectrum allocation criteria based on higher number of mobile users. Indian operators pay around $90 per Mhz of spectrum, which is much lower than what global operators have paid elsewhere at an average of $200 per Mhz.

Bias alleged

Sunil Mittal — “No spectrum should be allocated which may compromise the legitimate rights of existing players.”

The second issue that is bothering the GSM operators is that, allegedly, the telecom policy has been tweaked to favour Reliance Communication.

The Cellular Operators Association of India (COAI), which has filed an appeal before the Telecom Dispute Settlement Appellate Tribunal against the Ministry of Communication, says RCOM had started out as a fixed line telephone provider and after getting a foot into the mobility space through the CDMA route, has now managed to get into the highly lucrative GSM mobile space in such a way that existing operators are being put at a disadvantage.

The COAI has also questioned the Government’s decision to give RCOM the green signal for a GSM foray a day before making the policy public.

What is also irking the GSM camp is that even as the subscriber norms for private operators were being tightened, the DoT released additional spectrum to State-owned telecom companies BSNL and MTNL even though they did not qualify for it under the existing norms.

“I cannot see the logic why BSNL and MTNL, which have significantly lower customers than Airtel, have been doled out, at least from DoT’s point of view, generous spectrum even when they have not fulfilled the subscriber base criteria as prescribed in the current policy,” Mittal says.

Counter charge

Anil Ambani — “The GSM operators are actually pressurising DoT to follow existing norms for spectrum allocation that were formulated on an ad hoc basis in March 2006, without reference to any detailed technical study.”

With the GSM camp taking an aggressive stand, Reliance, for its part, charged that Bharti Airtel and Vodafone were allegedly hoarding spectrum, causing huge losses to the national exchequer. RCOM’s main point of attack is that the GSM licence does not commit spectrum beyond 6.2 Mhz while the likes of Airtel have already got 10 to 12 Mhz in some circles.

The Anil Ambani-promoted company has alleged that existing GSM operators were interested in blocking competition as it will break their cartel.

“These GSM players have acquired an additional 52 million subscribers in the past few years without any allocation of additional spectrum — while constantly representing to DoT that they did not have adequate spectrum for growth — if they did not have spectrum, how did they add this huge subscriber base?,” poses Ambani in a letter to the Prime Minister.

Hectic lobbying

Arun Sarin — “The TEC’s calculations and conclusions on spectral efficiency are inconsistent with our operational experience from serving over 230 million customers in 25 countries across five continents.”

The war of words has become so intense that Ambani has shot off three letters to the PM over the last one month even as hectic lobbying is going on from both sides at the PMO, Trai and DoT, in a bid to swing a decision in their favour.

Vodafone’s global CEO, Arun Sarin, Kumarmangalam Birla, Chairman, Idea Cellular, the Commerce Minister, Kamal Nath, Ho Ching, Executive Director & CEO, Temasek Holdings, and the Communications Minister, A Raja, have all written to the PM. Politicians, such as Rajeev Chandrasekhar, Abani Roy of the CPM, Chandrababu Naidu, former chief minister of Andhra Pradesh, and Manohar Joshi of the Shiv Sena have sought the PM’s intervention.

Suggestions have also been made to set up a Group of Ministers, which has been shot down by Raja who feels that the issue does not need inter-ministerial consultation. Some have even suggested that auctioning spectrum would be the best way to resolve the dispute.

Once again this has been shot down by the Communication Minister, who despite being in favour of auction, fears that such a move could lead to legal wrangles due to the manner in which spectrum has been doled out to operators until now.

“Existing operators have been given spectrum free of charge all this while so it will be unfair to new players if we go for an auction,” says Raja.

Caught in the crossfire

Caught in the crossfire are around 40 companies that had lined up for taking a new telecom licence.

Some of the new players, such as HFCL who are in front of the line for licences, have already sent legal notices to the Government seeking at least a letter of intent immediately.

They blame the GSM operators of putting pressure on the Government to put all the new applications for licences, on hold.

Other new applicants, who are at the back of the queue, such as AT&T and Videocon (which has Verizon as a partner) are, meanwhile, hoping that the Government will come around to auctioning spectrum.

The presence of multinational players in the tussle has drawn international lobby firms too.

The former US Ambassador to India, Robert Blackwill, has written to Raja saying that auction would be the best way forward to resolve the spectrum problems.

The tussle has arisen because DoT is likely to get only about 20 Mhz spectrum, which can accommodate the demands of five operators at best. The problem is there are at least 50 claimants.

Consensus elusive

A. Raja – “I am simply implementing what the TRAI and DoT have suggested. It is not as if the Communication Ministry has taken a decision on its own.”

Meanwhile, the Communications Ministry has set up a panel comprising technical experts and industry representatives to review the subscriber-based allocation criteria. However, after three meetings, the panel has not been able to thrash out any compromise due to sharp differences between the various groups.

DoT officials blame the GSM camp for intentionally holding up a solution as a delay would enable them to get more market share and stall the entry of new players.

GSM operators, on the other hand, accuse DoT of arm-twisting existing operators into accepting the new norms through policy interventions aimed at hitting their revenues (for instance — introducing mobile number portability selectively in metros and asking TRAI to set a ceiling for tariffs).

The PMO is also trying to thrash out a compromise formula between the Communication Ministry and the operators.

The Principal Secretary to the Prime Minister, T.K. Nair, has been meeting operators, DoT officials and the Communication Ministry to work out a solution to the imbroglio that threatens to put the booming telecom industry a few steps behind.

However, so far (at the time of going to press), most of the formulas failed to bring peace to the warring telecom sector, the meetings turning out to be one more ground for the operators to take shots at each other. One such formula proposed last week by DoT was summarily rejected by both GSM and CDMA operators.

Whether it is a case of too many cooks or whether these efforts would indeed end the telecom troubles is not yet clear.

But this is one pain for which the Communications Minister may want to find a cure fast.

tkt@thehindu.co.in

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Truce eludes telecom