Blame it on spectrum! That’s been the alibi of telecom operators on many of the ills in the system, including the call drop menace. As India readies for the next round of airwaves auction — bigger than the $17-billion previous round — what does it herald?
Stakeholders concede the next round of auction, which they expect some time in June, will put on the block the widest range of these scarce airwaves — in the bands 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.
Further, going by the base price recommended by the Telecom Regulatory Authority of India (TRAI), the industry watchdog, and the quantum that will be auctioned, the mop-up’s expected to be some Rs.560,000 crore, or a whopping $83 billion, payable over the tenure of the contract.
This is where the misgivings have already started. Industry estimates suggest telecom companies are already reeling under a debt of more than Rs.300,000 crore. At the recommended prices, the auction will swell their debt burden by as much as 185 percent.
“For the first time, the government has put abundant quantum of spectrum up for auction. But clearly, funding will be a tight squeeze for the players,” said Rajan S. Mathews, the director general of the Cellular Operators’ Association of India. “Banks are also over-leveraged on the sector.”
The contention starts with the reserve price. In the Delhi circle, TRAI has recommended Rs.1,595 crore for 700 MHz band, Rs.848 crore for 800 MHz, Rs.673 crore for 900 MHz, Rs.399 crore for 1,800 MHz, Rs.554 crore for 2,100 MHz, and Rs.143 crore for 2,300 MHz and 2,500 MHz.
Given this, Mahesh Uppal, director of independent consultancy Com First, feels the base price is rather steep. “Many are already under pressure. However, this will hurt smaller players most,” Uppal said.
Giving the present status over total spectrum held by some top telecom companies, ratings agency ICRA says Airtel tops the list with 763 MHz, Reliance Jio is next with 596 MHZ, followed by Reliance Communications (304 MHz), Vodafone (295 MHz) and Idea (271 MHz).
At the moment, Bharti and Reliance Communications are the only two companies that have spectrum in all the 22 circles for both voice and 4G data services. Reliance Jio has this in 20 circles for voice, none for 3G data and in all the 22 circles for 4G.
Stakeholders and experts feel apart from auctioning of spectrum, the government should also make available unused airwaves with state-run companies — BSNL and MTNL — to the private players through trading and sharing routes.
“The government should look at making use of the spectrum that the two state-run telcos hold — between 6 MHz and 12 MHz in each and every bandwidth in all the 22 circles between them. They should particularly free up space in the 900 MHz space by trading and sharing,” Mathews said.
In fact, in a bid to maximise spectrum usage, several trading and sharing deals were negotiated.
These include the ones that were struck between Reliance Jio and Reliance Communications, Bharti Airtel and Videocon and Bharti and Aircel — as also some that did not materialise, like the one between Idea Cellular and Videocon.
“Spectrum trading allows smaller telcos to monetise underutilized holdings and the larger telcos to attain spectrum outside the auction. Thus the trend of consolidation of spectrum holdings of the telcos is expected to continue in the medium term,” said ratings agency ICRA.
How will it impact on the menace of call drops?
“Certainly the auction will be important for service providers considering the various challenges they have been facing like call drops. It will improve customer experience and manage exponential data growth,” said Rishi Tejpal, principal research analyst at Gartner. “But putting forward the right reserve price will be key for the success of the auction.”
Experts feel spectrum is just one issue for solving the call drop problem. The government must also facilitate in areas such as contiguity of these airwaves for their optimal utilisation and ensure that they face no hurdles in erecting towers.
But which are the frequencies that will attract more attention in the auctions? Experts maintain that since voice has matured with 82 percent tele-density and low incremental revenues from it, data will be the next focus for spectrum acquisition.
“Data remains major thrust area for telcos as the segment is relatively under-penetrated,” said ICRA. “The growth in data revenues has been robust at around 120 percent over the last two years. This has resulted in increased focus of the telecom companies on enhancing their data services.”
Uppal said: “I would expect most focus on the 800 MHz and 2,100 space MHz since it is immediately deployable. The 900 MHz and 1,800 MHz are valuable, but the amount available is small. There will be a modest interest in 2,300 MHz as well, used by Jio and some others for 4G services.
“But 700 MHz band will pose problems in view of the very high reserve price. Some companies like Telenor and Vodafone India have expressed some interest in it and others could bid defensively,” Uppal added.
Aparajita Gupta / IANS
