The upcoming auction would have long term implications for the sector in terms of deployment of technology (as the auctioned spectrum would be liberalized), competitive intensity, spectrum holding, and pricing power of the operators.
This auction is likely to be used as market entering strategy by some new operators and strengthening strategy by the incumbent operators.
The high spectrum cost would impact the cost metrics for the operators, who are already burdened by highly leveraged balance sheets. This would exert pressure on the operators to hike the tariffs to recover the additional costs however the quantum and timing of the same remains uncertain.
Spectrum usage charges:
As recommended by the EGoM, no change has been made to the existing slab rate system for Spectrum Usage Charges, paid annually by the operators as a percentage of their Adjusted Gross revenues.
Impact Assessment :
In each of the 22 telecom circles, sufficient spectrum is available in 1800 MHz band to auction the maximum of 13.75 MHz. In the 800 MHz band, there is no spectrum in the Rajasthan circle, only 2.5 MHz in Andhra Pradesh circle and minimum of 3.75 MHz spectrum is available in four circles. In the remaining 16 circles, there is sufficient spectrum to auction the maximum of 5 MHz in 800 MHz band.
Circle-wise availability of spectrum as of Aug 2012:
As per TRAI recommendations, the total spectrum available in the 800 MHz and 1800 MHz, including the spectrum to be vacated due to cancellation of license, would be 137.5 MHz and 624.6 MHz respectively. However, the spectrum likely to be put up for auction in the 800 MHz and 1800 MHz is likely to be around 97.50 MHz and 302.5 MHz respectively, which is significantly lower than the available spectrum.
The proposed auction structure and the quantum of spectrum likely to be offered would allow for one new entrant in the 800 MHz band and two new entrants in the 1800 MHz band.
The operators whose licenses were cancelled are – Idea Cellular (Idea), Tata Teleservices (TTSL), Uninor, STel, Etisalat DB, Sistema Shyam, Loop Mobile, Videocon. Out of these, operators like STel, and Etisalat DB have expressed their unwillingness to continue operations in India.
Out of the remaining, operators like Idea and TTSL are likely to bid for spectrum in the cancelled circles to gain pan-India presence.
For the remaining operators, namely, Uninor, Sistema Shyam, Videocon and Loop, there is an uncertainty on the participation, given that they would need to bid for atleast 5 MHz in each telecom circle and a pan-India spectrum would cost Rs. 14000 crore (in 1800 MHz).
For the incumbent operators – Bharti Airtel, Vodafone, Idea, Reliance Communication (RCom), TTSL, and Aircel, the likely strategy would be to take stock of their current spectrum holding and bid selectively in the circles where they are facing spectrum constraints. Assuming the current technology paradigm of using 800MHz for 2G CDMA operations and using 1800 MHz for 2G GSM operations, auction of 1800 MHz is likely to be more aggressive, given that there are more participants present in this frequency band.
A key implication for the reserve price set up by the Union Cabinet is on the possible cash outflows for future spectrum charges like spectrum renewal fees and one time spectrum charge (if levied) for the existing telecom operators, since the prices discovered through the upcoming spectrum auctions would form the base for these charges.
Going by the reserve price, the telecom operators might have to incur substantial cash outflow at the time of renewal of spectrum (starting earliest by FY2015 for Bharti Airtel).A one-time spectrum charge would be an additional financial burden for the telecom operators, although there is no certainty on levy of the same.
Source : ICRA Research.
ankit August 29, 2012 at 10:09 pm
@ nihit
mts licence in rajasthan is not cancled…though cancelled in rest of india
Saurabh August 17, 2012 at 10:27 pm
@Aminesh,
Bro, let me make some points clear to you.
1. 800MHz band is not a new band for India or anyone in this world. It has been allotted to CDMA operators in India since 2003-04 when Reliance Infocomm started CDMA services. May be you have used GSM only and know something about its operating frequency.
2. 800MHz is not meant to be auctioned for GSM operators. It’s for CDMA providers. MTS or any other new operator who is willing to start CDMA services will bid for this band.
3. Reliance, Tata Indicom (Now Tata Docomo CDMA), BSNL CDMA and MTS are all operating on 800MHz spectrum band from years and all CDMA phones in India support 800MHz band and some also have support for 1900MHz. These band are not for GSM i.e why GSM handset don’t support it.
4. 800/1900 MHz band is allotted in Canada to CDMA operators only not GSM as CDMA services are most preferred in US and Canada. So these two bands are standardized for CDMA platform and services only.
ITU has standardized bands for different types of services and these are accepted throughout the world to provide seamless connectivity to users.
In India and most of the countries, bands are allocated to different services as follows:
1. 900/1800 MHz for GSM services.
2. 800 MHz for CDMA services.
3. 2100 MHz for 3G services.
4. 2300 MHz for 4G/LTE services.
I hope you get it.
Animesh August 17, 2012 at 9:05 pm
Some of the new operators we would like to see bidding for spectrum
1)Orange (France)
2)O2 /T Mobile (United Kingdom)
3)Optus/Telstra(Australia)
Uninor should be rebranded as Telenor. Telenor is the 4the largest mobile operator in the world
Animesh August 17, 2012 at 8:40 pm
The 800 Mhz is altogether a new frequency put up for auction.Presently 900 Mhz and 1800 Mhz frequency had been alloted to the GSM Mobile operators in India. 900 Mhz to the older opeators like Idea/Airtel/Vodafone and 1900 Mhz to newer entrants like Uninor/Docomo/Aircel.The 800 Mhz /1900 Mhz are used by GSM operators in Canada/United States of America.Opening up altogether a new frequency of 800 Mhz would mean that now mobile users would mandatorly buy newer handsets, as most of the mobile users use dual/triband handsets which support 900 Mhz/1800 Mhz or 1900 Mhz (for triband handsets, in use for International roaming only).High end handsets like Black Berry/Apple I Phone etc support quad band as well ie 800 Mhz as well.
Animesh August 17, 2012 at 8:16 pm
I guess GSM Operators in India operate on two different frequencies ie 900 Mhz and 1800 Mhz. 800 Mhz/1900 Mhz is commonly used in USA/Canada,Most of the handsets used in India are dual band,ie these handsets support only 900 Mhz and 1800 Mhz.Tri band handsets support 1900 Mhz as well. So I guess opening up the new 800 Mhz frequency would make people buy newer handsets required for this frequency
Saurabh August 16, 2012 at 11:09 pm
The three circles where Tata Docomo has lost licenses are Assam, J&K, North East.
So Delhi waleyo don’t worry until unless COAI asks Govt or DoT to include and cancel all the GSM licenses of Tata Docomo as they also received spectrum in 2008. One of the industry body ASSOCHAM had withdrawn their writ petition in this regard some days ago. But bad surprises are always ready to knock telecom sector’s door in India.
Everything goes bad when greed comes in..
Saurabh August 16, 2012 at 10:58 pm
@Nihit from Delhi,
I don’t think Tata Docomo has lost license for Delhi circle. They have only lost 3 of their 2G licenses. The main problem is no spectrum is available in Delhi circle to be alloted i.e why Tata wasn’t able to start their services. Now spectrum is available and I hope DoT allots them start-up spectrum to start services. As far as Uninor is concerned, I don’t think they will bid for Delhi as it is among the costliest and services are not available there. For Mumbai, which is even costlier, they can consider but they will become successful or not is under doubt.
As far as other operators like Videocon is concerned, bidding for Delhi or Mumbai is a distant dream for them. If they only bid for 1-3 circles, then we can expect them. Otherwise they will emphasize more on B category or some C category circles..
Saurabh August 16, 2012 at 10:42 pm
@Nihit from Delhi,
I don’t think Tata Docomo has lost license for Delhi circle. They have only lost 3 of their 2G licenses. The main problem is no spectrum is available in Delhi circle to be alloted i.e why Tata wasn’t able to start their services. Now spectrum is available and I hope DoT allots them start-up spectrum to start services. As far as Uninor is concerned, I don’t think they will bid for Delhi as it is among the costliest and services are not available there. For Mumbai, which is even costlier, they can consider but they will become successful or not is under doubt.
As far as other operators like Videocon is concerned, bidding for Delhi or Mumbai is a distant dream for them. If they only bid for 1-3 circles, then we can expect them. Otherwise they will emphasize more on B category or some C category circles.
Saurabh August 16, 2012 at 10:29 pm
Don’t worry bro. Shayam Telecom or Rainbow or MTS, whatever you call it hasn’t lost its license for Rajasthan circle. Actually those 21 licenses which were issued to Shyam Telecom in 2008 has been cancelled. MTS services in Rajasthan will continue.
Shyam Telecom had applied for Pan-India license when they were operating in Rajasthan under brand Rainbow. MTS invested in the company after they got Pan-India license and took the majority stake. Later the company was re-branded as MTS India. They don’t need to bid for Rajasthan.
Anirban Das August 16, 2012 at 10:24 pm
@Mane
MTS has already valid licence in RAJASTAN, that is one valid licence of MTS . No new cdma operator can’t enter.
Anirban Das August 16, 2012 at 10:22 pm
@Mane
MTS has already valid licence in RAJASTAN. And MTS has only one valid licence in RAJASTHAN. No new cdma operator can’t enter.
Anirban Das August 16, 2012 at 10:19 pm
@nihit
MTS has already valid licence in RAJASTAN. no new cdma operator can’t enter.
Ganesh August 16, 2012 at 7:24 pm
Nice insight!
@Mane
That means that in Rajasthan operators have been using 1800MHZ from the beginning.
nihit August 16, 2012 at 7:08 pm
somebody throw light on new entrants in delhi?
and possible scenario after the auction
is docomo , uninor likely to bid for delhi?
somebody plz tel
nihit August 16, 2012 at 7:06 pm
i think it means no new operator can enter, but old operators can bid
Mane August 16, 2012 at 5:26 pm
There is no spectrum on 800 mhz in Rajasthan. So it means mts will have to close their cdma service in this state?
Please anybody clarify this question.
Mahanthesh August 16, 2012 at 4:22 pm
How nice of you!! Expecting Sibal to run one more tenure… I mean during next election Con-GRESS is going to form the Government ?! :p
PD August 16, 2012 at 2:45 pm
Not in the near future, wait……… for “another” announcement of “telecom policy” from Mr. Sibalji…!
jibin August 16, 2012 at 2:36 pm
WHEN IT WILL HAPPEN……….. FREE ROAMING???????????????
Jaswanth roy August 16, 2012 at 2:09 pm
The real impact would be the consolidations of big cartel trio Airtel-Vodafone and Idea with small cartel trio Aircel-Tata docomo-Reliance, thus in the name of price corrections they would definitely hike the 2g voice tariffs at least by 100 % from the current already high tariffs of 2p/sec by these cartel. If only BSNL/MTNL would not follow the cartel’s high price correction the ordinary consumer will definitely have to shell out more by many fold on telecommunication. I wish at least tariff friendly trio MTS-UNINOR-VIDEOCON should stay in the competition by winning the spectrum at least in few circles so that customers might benefit on their reasonable price corrections. Anyhow, price hike is inevitable, but how much it would be a puzzle if tariff friendly trio stays out of final bid.
P. Abraham Paul August 16, 2012 at 1:47 pm
It was(is) wrong to sell Wireless Spectrum.
I am stead fast in my opinion that I had from the inception of GSM in India that Government’s decision to sell Wireless Spectrum to private telecom industrialists is wrong due to facts mentioned below. If resorted to, it will not only be against the interest of the Industry as a whole but also of the end users and will push the country towards losing the benefits of privatization in the long run. In addition to killing the Telecom Goose that lay golden eggs it will also lead to never ending litigation. Please see my blog: