New Delhi: M ukesh Ambani’s Reliance Industries Ltd (RIL) could be the main beneficiary of the Telecom Commission’s decision on Monday to allow firms with BWA (broadband wireless access) spectrum and an ISP (Internet service provider) licence to offer voice services after payment of a fee.
Such a move would not only see Ambani returning to the kind of phone services that were offered by Reliance Infocomm Ltd, which was set up by him in 2002, but also challenge the current pecking order in the industry led by Bharti Airtel Ltd. The Reliance phone business, now called Reliance Communications Ltd (R-Com), went to Ambani’s younger brother Anil Ambani as part of a settlement between the two in 2005.
The Telecom Commission said on Monday that companies with BWA spectrum and an ISP licence can migrate to a new unified licence regime and offer voice services on payment of Rs.1,658 crore.
RIL is the only company with BWA spectrum across the country, having bought a 95% stake in the Nahata-family promoted Infotel Broadband Services Ltd for Rs. 4,800 crore in 2010. It is expected to offer 4G, or fourth generation, communication services that theoretically enable high-speed wireless data transfer of around 100 megabytes per second.
RIL has, however, not been able to launch its services yet. It’s reportedly planning to do so in 2013 in at least Delhi, Mumbai and Jamnagar.
RIL didn’t respond to emails and phone calls.
Analysts had expected the 4G network to use some of R-Com’s network infrastructure through a partnership.
The Telecom Commission’s decision could mean a redrawing of that strategy.
The step would likely boost the viability of service providers, said Hemant Joshi, partner at Deloitte Haskins and Sells.
“As 3G has not taken off the way it was envisaged by the operators, therefore, this move is likely to improve the prospect of BWA spectrum holders considering the mass voice market which is up for grabs,” he said. “This looks like natural progression towards technology neutrality, which is a welcome move. However, the government needs to ensure fair treatment for all technology licence holders in this neutrality move to reduce litigation and have clarity in policy and its implementation.”
Joshi doesn’t see the move leading to price disruptions as “call rates are at rock bottom and any new operator would take time to build required ecosystems/support system to provide pan-India coverage”.
A Mumbai-based telecom analyst at a multinational investment bank said, “The move does improve their capabilities as it would have been difficult to be a stand-alone data provider in India, but it does not mean they will launch overnight.” He didn’t want to be named as his organization doesn’t authorize him to speak to the media.
As for high-speed data services, he said, “There is still a lot of work to be done, including the introduction of 4G capable handsets in the Indian market. The ecosystem takes a lot of time.”
A senior executive at one of RIL’s vendors said, “There has been a lot of work done and they are still working on it, but there is still no clarity as to when they will start and what they will offer.” He didn’t want to be named owing to the sensitivity of the issue.
RIL would need to enter the voice segment as well to make its 4G services viable, an HSBC Securities and Capital Markets (India) Pvt. Ltd report said in October last year.
“A data only strategy has not succeeded elsewhere globally. While the long-term potential for the data market remains substantial due to the sheer number of subscriber base, we believe the explosive growth that the voice market saw from less than 50 million subscribers in 2000 to more than 500 million by FY10, is unlikely to be repeated due to several challenges, including the discretionary nature of expenditure,” the report said.
The Telecom Commission also decided to hold a third spectrum auction in March for the 18 circles where some spectrum was successfully sold in the November 2012 auction.
According to senior officials in the department of telecommunications (DoT), including telecom secretary R. Chandrashekhar, the price discovered for the spectrum in November will be the reserve price. A new notice inviting applications for the auction will likely be issued this week.
The move comes after the Supreme Court on Friday clarified that the government had to auction all the spectrum that was made available due to the cancellation of licences on 2 February 2012. That’s when it scrapped 122 telecom licences and spectrum allocated to nine companies on the grounds that the procedure for the allocation of the resources was flawed.
The court had directed the government to auction the spectrum to be vacated by the cancelled licences, a sale that took place in November last year. However, the government did not auction all the spectrum and kept some in reserve to be allocated as additional spectrum for older telcos unaffected by the ruling.
The auction is expected to start on 11 March and will see the sale of 1800 megahertz (MHz) spectrum in Delhi, Mumbai, Karnataka and Rajasthan, the four circles that did not receive a single bid in the November auction. DoT will also auction 900MHz spectrum in Delhi, Mumbai and Kolkata, where the older operators will see their licences expire in November 2014.
The older operators have to win spectrum to be able to continue services in these circles. DoT will also auction 800MHz band spectrum, commonly called CDMA spectrum, after the conclusion of the 1800MHz and 900MHz spectrum auction. The CDMA spectrum auction was to occur in November, but had to be postponed as there were no bidders. Tata Teleservices Ltd and Videocon Telecommunications Ltd withdrew their applications citing too high a reserve price.
Sistema Shyam Teleservices Ltd has already confirmed that it will participate in the March auction for 800MHz spectrum.
The Telecom Commission also decided to allow the installation of 2,199 towers in Maoist violence-affected areas at a cost of Rs.3,000 crore.
The panel deferred its decision to include tower companies under the licensing regime as well as the sale of 10% equity in state-run Telecommunications Consultants India Ltd.