Bharti Airtel, Vodafone India, Idea Cellular and Bharat Sanchar Nigam Ltd face a Rs 1-lakh crore outgo with the Telecom Commission deciding to re-farm the entire spectrum held by them in the 900 Mhz frequency band.

The Commission’s views will be referred to the Empowered Group of Ministers (EGoM), which is expected to meet on Thursday to take a final decision on the issue.

Re-farming essentially means shifting operators from one frequency band to another. In this case, operators will be shifted to the 1,800 Mhz band.

A report from research firm Analysis Mason said the operators using 900 Mhz spectrum will need to replace 286,590 base stations and install 171,954 more base stations to provide equivalent coverage using 1800 Mhz spectrum. This would require an incremental capital expenditure of Rs 54,739 crore and incremental annual operating expenditure of Rs 11,762 crore. An additional capital expenditure of about Rs 26,653 crore will be required to deploy new towers to support the incremental base stations.

If the incremental investment incurred due to re-farming is passed on to the customers then tariffs would increase by 64 paise a minute, the report commissioned by the incumbent GSM operators said. If the re-farming cost is not passed on to the consumers, then operators' EBITDA margins will decline by 8 per cent, it said.

Vodafone, for instance, has spectrum in the 900 MHz band in the 10 circles coming up for licence extension in 2014 and 2015. The total investment in the network in these 10 circles to date is around Rs 16,700 crore. As the 900 MHz radio equipment at each site cannot be reused in the 1800 MHz network, it will all need to be written off. In addition, it will cost around Rs 10,000 crore to shift its network to the new frequency. “This is a disaster. If the final decision of the EGoM remains the same, we will have no option but to challenge it legally,” said Rajan Mathews, Director-General, Cellular Operators Association of India.

The Telecom Regulatory Authority of India had first proposed this re-farming exercise to give all operators in the market a fair chance to get bandwidth in this frequency band, which is considered to be superior to the 1800 MHz band.

Level playing field

New players that do not own any frequency in 900 Mhz band, said that the Commission’s decision was a right step towards creating level playfield. “The incumbents have reaped significantly high benefits by exclusive use of 900 Mhz spectrum for a decade and have gained market leadership and have achieved profitability due to very high quality of service and significantly lower cost associated with 900 MHz spectrum,” said the Association of Unified Telecom Service Providers of India, the industry body representing Reliance Communications and Tata Teleservices.

>Thomas.thomas@thehindu.co.in

comment COMMENT NOW