Bharti offer could ring in auction era

Bharti offer could ring in auction era

New Delhi: A day before an Indian telecom tribunal prepares to hear a petition filed by an industry lobby challenging the government’s decision to allow CDMA phone service firms to offer more profitable GSM services, industry executives and regulatory experts say radio spectrum auctions are increasingly emerging a likely option in the world’s fastest growing wireless market.

CDMA, short for code division multiple access, is a US-developed wireless communications standard. One out of every four mobile phone customers in India is on a CDMA network. The rest are on GSM networks.

Experts and executives used the a-word (auctions) after India’s biggest mobile phone services firm by subscribers Bharti Airtel Ltd offered the government Rs2,650 crore for 4.4mHz of spectrum on Monday and indicated it was ready for an auction.

In his letter to telecom secretary D.S. Mathur, Bharti Airtel joint managing director Akhil Gupta wanted his firm’s offer be treated as its initial bid for spectrum across India—Rs1,000 crore above the Rs1,650 crore fee the government charges for a new pan-India licence.

“Furthermore, we would like to reserve the right to increase this bid in the event of an auction for such a pan-India GSM spectrum allocation and further this may be taken as our initial bid for the start-up pan-India spectrum," Gupta wrote. On Tuesday, Gupta told Mint that the position meant “if anybody comes and offers more than what we have to offer, then it is like an auction", adding he has no indication what would be decided.

The industry lobby representing GSM operators such as Bharti Airtel echoed this expectation. “We do seem to be headed in that direction (auction), especially because the government cannot ignore such offers," said T.V. Ramachandran, director general of the Cellular Operators Association of India (COAI), which is appealing before the Telecom Disputes and Settlements Appellate Tribunal (TDSAT) the entry of Reliance Communications Ltd (RCom), which runs CDMA networks, into GSM services. The case is being heard on Wednesday, as is a COAI plea on tighter subscriber-linked criteria for allocation of spectrum proposed by the department of telecommunications (DoT). Reacting to Bharti Airtel and COAI’s views, a senior DoT official said rules for the sector could not accommodate such requests. The official declined to be identified.

Some experts said the government made a mistake late in 2003 when it shifted to a universal licensing access regime, combining the right to offer mobile and fixed-line phone services under a single licence with a fixed entry fee of Rs1,650 crore. “It was a blatant mistake to move from auction to a fixed fee in November 2003," said Varadharajan Sridhar, a professor of information management at Management Development Institute, Gurgaon. “With differences between regulator (the Telecom Regulatory Authority of India, or Trai) and DoT, the ongoing ambiguity is killing the industry."

With around 25mHz of spectrum to be made available by DoT early next year thanks to a vacation of the spectrum by defence forces, existing operators, including Bharti Airtel and second-ranked RCom, apart from several new applicants, are in queue for offering phone services. Bharti Airtel and RCom and the associations that they are respectively part of have been engaged in a public exchange of views through letters released to the media in the past few weeks.

Despite many operators now favouring an auction, some firms want their spectrum needs to be addressed before any such move is made. “Auction could be a good alternative for allocating any extra spectrum, which remains after giving it to those already in the queue," said a top executive at a phone firm, who did not want himself or his company to be named.

By 1 October, the last date set by communications minister A. Raja for new applications, around 46 firms, including existing operators such as Idea Cellular Ltd and entrants Bycell Telecommunications India Ltd, Parsvnath Developers Ltd and AT&T Global Network Services Ltd, had sought spectrum and new licences.

“When you have so many aspirants for spectrum, which is a scarce resource, auction is the only transparent way to allocate it in a fair manner," said regulatory expert Mahesh Uppal. B.K. Syngal, a former chairman of Videsh Sanchar Nigam Ltd, estimates the additional 25mHz spectrum could be valued at $7 billion (Rs27,650 crore).

COAI last week pulled out of a panel set up by DoT to examine an almost eightfold increase in subscribers per mHz norm proposed by DoT’s technical wing Telecom Engineering Centre. “It is evident that the committee is merely going through the motions of the process and is not intending or willing to either consider the inputs or address the concerns of the GSM industry," said Ramachandran in a letter to DoT on 7 December.

Some experts such as Rekha Jain, a professor at the Indian Institute of Management, Ahmedabad, said it’s not entirely about GSM operators. “Neither Trai, nor any other authority has been able to guarantee a road map for spectrum allocation to these players," she said. “The industry could have saved a lot of time and effort if these GSM operators had agreed to an auction some time back."