Telecom players slam 2G spectrum proposals

NEW DELHI, INDIA: India's telecom regulator proposed steep rises in the price of second-generation (2G) mobile radio waves, drawing criticism from carriers Bharti Airtel and Vodafone Essar who could pay hundreds of millions of dollars more.

The Telecom Regulatory Authority of India's (TRAI) proposals to the government come in the wake of a scandal involving the cheap issuance of licences and mobile spectrum in 2007/08 that a state auditor estimated may have cost New Delhi up to $39 billion in potential revenue.

India, the world's No.2 mobile market by users, is also overhauling its decade-old telecoms policy and will separate 2G radio spectrum, which now comes free with telecoms licences, and ask companies to pay market-linked prices.

Also, the government will ask older operators on the GSM platform, such as Bharti, Vodafone's India unit and Idea Cellular, that have been allotted more than 6.2 megahertz of 2G airwaves, to make a one-off payment for the extra bandwidth.

Such a pricing mechanism was to be suggested by the regulator although the proposals are not binding on the telecoms ministry, which will take a final decision.

Vodafone Essar, a unit of Vodafone, said in a statement its own one-time payout under the proposals would be 1743 crore rupees ($383 million) and estimated that of market leader Bharti Airtel to be 4000 crore rupees.

Reliance Communications, which is predominantly a CDMA operator and in recent years expanded its GSM service, would have to pay 700 million rupees, Vodafone Essar said.

Vodafone Essar Chief Executive Marten Pieters called the proposals "flawed, illogical" and "discriminatory" against the older operators.

Bharti Airtel said the regulator's pricing proposal was unfair and "defies logic" but said it was confident that the government's final policy would be fair and non-discriminatory.

India has 752 million mobile subscribers and is adding 17-18 million a month, faster growth than anywhere else, although fierce competition squeezes margins and regulatory uncertainty clouds the outlook for operators.

Earlier, Deutsche Bank analysts wrote that they estimated a potential payout of $750 million for Bharti Airtel and $300 million for sixth-ranked Idea Cellular.

Idea Cellular said it was "dismayed" by policy "flip-flops" in India's telecoms sector and called the regulators' 2G spectrum pricing proposals "arbitrary."

A Mumbai-based analyst, who did not wish to be named, estimated Bharti's payout at 35 billion rupees, Vodafone Essar's at 17.24 billion rupees and Idea Cellular 13.41 billion rupees.

The TRAI had recommended in May that mobile carriers pay a one-time fee for holding 2G radio-spectrum beyond 6.2 megahertz based on 3G prices, a move that drew protest from established firms. Later, the regulator said it would submit new proposals.

Price proposals

The TRAI said it had recommended an increase in spectrum price for all of India to 17.7 billion rupees per megahertz for up to 6.2 megahertz, and to 45.72 billion rupees per megahertz for spectrum beyond that.

By comparison, telecoms firms have paid an estimated 2.68 billion rupees per megahertz in previous allocations based on a telecoms licence price determined in 2001, the regulator said.

Both Vodafone Essar and Bharti said the new pricing recommendations would mean companies would in some cases pay more than what they paid for 3G spectrum, which is seen as more efficient than 2G.

The TRAI said it had suggested the new prices be made applicable retroactively from April 1, 2010.

Shares in Bharti closed 0.3 percent down at 332.35 rupees, while Idea fell 3.1 percent to 66.30 rupees in a Mumbai market that lost 1 percent. Vodafone shares in London were up 0.2 percent by 1519 GMT.