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GSM firms see red over auction proposal

GSM firms see red over auction proposal
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First Published: Tue, Jul 24 2007. 11 54 PM IST
Updated: Tue, Jul 24 2007. 11 54 PM IST
The GSM cellular industry and Reliance Communications Ltd, the biggest CDMA-based mobile phone company in India, may be readying for a face-off over a new government proposal to auction wireless spectrum, replacing the practice of allocating frequency based on the number of subscribers on each network. Wireless frequency is increasingly becoming a scarce resource given the growing number of users for the available spectrum.
The Cellular Operators’ Association of India (COAI), a trade body representing GSM phone firms, has dashed off a letter to the Union communications and information technology minister Andimuthu Raja, claiming that auctioning voice spectrum for existing players will be construed as tampering with the agreed-to pricing policy for allocating frequency.
A spectrum is essentially a range of frequencies; telecom firms need to be allocated a certain ‘volume’ (or bandwidth) of a specific frequency to start offering their services.
“Any consideration of (the) feasibility of auctions is completely untenable and in conflict with not only the existing policy and licensing framework, but also the contractual settlement between the government and the GSM industry,” T.V. Ramachandran, COAI secretary-general, said in a letter to Raja on Monday.
The issue was pitchforked into the foreground after the country’s telecom regulator, Telecom Regulatory Authority of India, in a recent consultation paper on mergers and acquisitions, and competition in the telecom industry, raised the question whether the current method of allocating extra spectrum when an operator crosses a preset number of subscribers, is the most efficient way to distribute the scarce resource.
A modification of the subscriber-linked spectrum allocation method may negatively impact the interests of large GSM players Bharti Airtel Ltd and Vodafone Essar Ltd, who qualified for extra spectrum long back when their subscriber numbers swelled beyond the thresholds set by the department of telecommunications (DoT). For example, in Mumbai, which has the highest amount of radio spectrum handed out to GSM operators at a total of 37.2MHz, the biggest operator, Vodafone Essar, holds just 10MHz despite being eligible for another 5MHz going by its 2.6 million customer base.
The policy change, if carried through by DoT, will benefit smaller GSM players such as Idea Cellular Ltd and the CDMA operator Reliance Communications, which needs more spectrum to start services in new areas. The Anil Ambani-led firm had suggested that the allocation method be changed to one of auctioning to the highest bidder.
Raja’s office did not return calls for comment. A spokesman for Reliance Communications said the company has already aired its views before the regulator.
Corporate lawyers predicted a long legal battle if DoT changed the policy. “If this issue comes before a court, it has the potential to go all the way up to the Supreme Cour,t as it can be interpreted either way,” said one prominent telecom lawyer, requesting anonymity, as one of his clients has an indirect involvement in the matter.
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First Published: Tue, Jul 24 2007. 11 54 PM IST