NEW DELHI: Two major airwaves auctions in the next 12 months – the sale of freed-up spectrum following the Supreme Court’s cancellation of 122 mobile phone licences and fresh bids for 4G permits – are set to trigger a new round of corporate hostilities in the controversy-ridden telecom sector as some of India’s biggest business groups lobby for policies that will benefit them and harm rivals in the upcoming sales.
Unlike in the past, when telecom firms gravitated towards two distinct camps, based on whether they were running their networks on GSM or CDMA technology, this time there are as many alliances as there are issues and positions.
The fact that Anil Ambani’s Reliance Communications and Mukesh Ambani’s Infotel Broadband appear to be on the same side of the fence on some key issues, with Bharti Airtel, the country’s largest telecom company, on the other, will add to the drama.
“Every operator is fighting for its own narrow interests and these are mutually destructive wars,” says BK Syngal, who was chairman of Reliance Infocomm between 1999 and 2002.
The telecom sector is, of course, no stranger to corporate battles and intrigue. More than a decade ago, the undivided Reliance Industries in face of opposition from Bharti Airtel and other GSM operators was able to convince the government to change policy to allow CDMA operators to offer full-fledged mobile services.
In 2007-08, then telecom minister A Raja, after months of hectic lobbying, embarked on a ‘first-come-first-served’ policy for awarding 2G spectrum, setting off a chain of events that culminated in his imprisonment, arrests of high-profile executives, and the eventual cancellation of licences by the apex court.
This time, the first flashpoint revolves around the proposed 2G auctions. Companies such as Datacom, S Tel, Uninor and Etisalat, who have lost their licenses, have demanded a two-round auction, where the first phase is restricted to only them and companies who do not have mobile operations in the country.
This proposal has a powerful backer in Mukesh Ambani’s Infotel Broadband. Infotel, after bagging pan-India 4G broadband licence, is now gearing up to enter the voice telephony market and it too wants the first stage of auctions to be restricted to new entrants and those companies whose licenses were cancelled.
But Idea Cellular and Tata Teleservices whose licences were also cancelled in seven and three circles, respectively, have joined the largest GSM operators, Bharti Airtel and Vodafone, in seeking that the sale process be open to all players.
The established companies see the new auctions as an opportunity to garner more airwaves, making themselves less vulnerable to the risk of losing spectrum when their licences come up for renewal in 2014 and beyond.
These companies have also cautioned the regulator against imposing any cap on the total airwaves that can be acquired by any mobile phone company in the auctions.
Trai’s consultation process on the 2G auctions has opened up another new front as the Ambani bothers have joined ranks to take on incumbent GSM operators over redistribution of the crucial 900 MHz, used for providing 2G services by Bharti, Vodafone and Idea.
RIL-owned Infotel has supported the demand of the Anil Ambani-owned Reliance Communications that 900 MHz band be redistributed among the winners of the upcoming 2G auctions.
This frequency is considered to be more efficient and all later entrants into mobile telephony, including the Tatas, have argued for years that incumbents enjoyed savings of over 20,000 crore in capex and opex because they operate on the 900 MHz band.
Infotel and Reliance Communications are of the view that the 900 MHz airwaves held by incumbents, along with the less efficient 1800 Mhz which is being re-auctioned should be redistributed among old and new operators in such a way that there is a level playing field among all the players.
But the current occupants of the 900 MHz band have claimed a ‘legal right to this frequency allocated to them for the initial as well as extended licence period. “Any contrary proposal for unilaterally taking away the assigned spectrum may have legal implications,” said Bharti Airtel to Trai.
Bharti, Vodafone and Idea argue that about 500 million of the 900 million cellphone users in the country were on the 900 MHz frequency and the cost of migration if not funded by the government, would ultimately have to be recovered from the customers.
“Given the proposed huge loses due to refarming, lowest tariff in the world, highest competition and the least allocation of spectrum with the highest degree of uncertainty, it is unlikely that investors will find this business proposition strong enough to support,” said Idea Cellular said in a recent communication to Trai.
Idea Cellular has broken ranks with its traditional allies, Bharti and Vodafone, over when 4G auctions in the 700 MHz band should be held. Telecom minister Kapil Sibal has recently announced that the government would complete the sale of airwaves in the 700 bandwidth this fiscal.
While leading GSM players like Bharti, Vodafone and even dual technology operator Tata Teleservices favour early 4G auctions, others like RCOM, Idea Cellular and Sistema Shyam have opposed it.
Idea Cellular and RCOM say that 4G services have not reached a level of affordability globally and want the auctions deferred till 2015 by when they expect the global market to mature.
Infotel Broadband, the only company that currently holds 4G airwaves (but in the 2300 MHz band), has told Trai that the 2G auctions should be held first and sale of airwaves in the 700 MHz band be held later.
Bharti Airtel, which won only four circles in the broadband auctions of 2010 but has aspirations of being a big player in the 4G market, is keen that the auctions be held at the earliest. It believes that the 700 MHz band is far more efficient than the frequency that was awarded to Infotel in the previous auctions.
Amidst all these issues, some old controversies remain. An internal telecoms department note last month suggested that the government may do away with its plans of imposing a one-time charge retrospectively on mobile phone companies such as Bharti Airtel, Vodafone, Idea and BSNL for all the ‘excess’ airwaves they hold.
This will mean that BSNL will not have to cough up around 10,000 crore, while Bharti Airtel, Vodafone Essar and Idea will end up saving around 8,000 crore, 5,000 crore and 2,000 crore, respectively.
As soon as this internal note became public, the industry body representing dual technology companies, including Reliance Communications and Tatas, shot off an letter to the telecoms department protesting that a change of mind on this issue would cost the exchequer 20,000 crore.