Telcos seeking to expand their footprint in India, the world’s fastest-growing mobile telephony market, will be severely tested by the paucity of wireless spectrum even after the country’s military vacates some part of this, unless the government changes its allocation rules.
The companies affected include Reliance Telecom Ltd, a telco that’s part of the Anil D Ambani Group that offers services on the GSM technology platform (its associate Reliance Communications offers services on the rival CDMA platform), Spice Telecom Ltd and Idea Cellular Ltd.
Anil Ambani’s Reliance Communications is the country’s second-largest cellular firm but he now wants to expand his GSM business.
A spectrum is essentially a range of frequencies; telcos need to be allocated a certain ‘volume’ (or bandwidth) of a specific frequency to start offering their services. Although the military, which was occupying large areas of the spectrum, will free up parts of it by July, companies waiting to start their cellular services will find the going tough and slow.
That’s because the government hasn’t acted on any of the applications by the telcos, some dating back to the middle of 2006; some telcos and analysts question the government’s formula for allocating spectrum—on the basis of a subscriber-linked formula that favours incumbent telcos and not new entrants; and large telcos with a pan-Indian presence such as Bharti Airtel Ltd and Hutchison Essar Ltd want more spectrum as they grow their subscriber base.
The GSM industry, which accounts for seven out every 10 mobile phone users in the country, is itself divided on the best way to split the spectrum—20MHz—that the Indian Army will vacate. The current allocation of spectrum to GSM firms is 37.5MHz. Applicants with pan-India networks claim they have the first right over the spectrum under the government’s subscriber-linked allocation formula, but regional operators such as Spice Telecom Ltd and Idea Cellular Ltd are worried their expansion plans may remain on paper if the department of telecommunications (DoT) sticks strictly to the formula.
“There should be no doubt about the priorities for spectrum distribution,” says T.V. Ramachandran, secretary general of the GSM industry lobby Cellular Operators’ Association of India (COAI).
He suggests that the needs of regional operators, who want to acquire new licences and spectrum in new ‘circles’, should be met after enough spectrum is allocated to firms which already have services there. Circles, mostly analogous to states or large metropolises, refer to areas where companies have licences to provide services.