New Delhi/Mumbai: The Telecom Regulatory Authority of India’s (Trai) plan to impose new fees for second-generation mobile spectrum in India sent shares skidding in carriers including Bharti Airtel, which called the proposal “shocking, arbitrary and retrograde."

Market leader Bharti, which may have to pay an estimated $1.4 billion if the proposal is adopted, saw its shares end 8.3% lower on Wednesday, wiping $2 billion off its value and prompting an unusually strong response from a major Indian firm.

Shares in smaller rival Idea Cellular fell 8.2%.

On Tuesday, the Trai recommended that companies pay a one-time fee for holding 2G radio-spectrum beyond 6.2 megahertz (MHz) based on 3G prices, a move that will hit established operators dominant on the platform.

Bharti and others, including Vodafone’s Indian unit, are locked in a multi-billion bidding war for 3G spectrum that has exceeded forecasts.

“We are confident that the DoT (Department of Telecommunications) and the government will take a rational approach and summarily reject these arbitrary, impractical and perverse recommendations," Bharti said in a statement.

The regulator’s recommendations must be accepted by the government before they become law.

Analysts said the proposal would stretch the balance sheets of market leaders, such as Bharti, Vodafone Essar, and Idea, which compete in a cut-throat market and face billions of dollars in capital expenditure to pay for 3G spectrum and build high-speed networks.

Meanwhile, Bharti is absorbing its recent $9 billion acquisition of Zain’s operations in Africa.

“This has come at a time when Bharti is working on closing the Zain deal integration, 3G auction is acting as a burden and the local competition is not showing signs of stabilizing," said Sanjay Chawla, an analyst at Anand Rathi Financial Services.

Bharti shares fell as much as 9% during the day to its lowest level in more than five months. The stock was the top faller in a steady Bombay 30-share index and has lost 21% this year, while the index is down by 1.5%.

Shares in Reliance Communications ended little changed, and analysts said the No. 2 operator would be hurt less as it is mainly a CDMA operator and does not hold much additional spectrum beyond the 6.2 MHz limit for GSM services.

Reliance welcomed the regulator’s proposal, saying it was “pro competition and pro spectrum efficiency".

Competitive market

Brokerage Prabhudas Lilladher expects Bharti to pay a one-time 2G spectrum fee of Rs6,146 crore ($1.4 billion), while Idea would have to pay Rs2,481 crore if the Trai’s recommendations are accepted by the telecom ministry.

Bharti, controlled by billionaire Sunil Mittal and 32% owned by Singapore Telecommunications, has been struggling in a margin-squeezing price war with Reliance and other rivals in the world’s fastest-growing and arguably the most competitive market.

Call rates have slumped to as low as 0.7 US cents per minute in a market with 15 operators and about 600 million mobile users, making it the world’s largest after China.

New subscriber additions of nearly 16 million a month have attracted overseas firms such as Norway’s Telenor, Japan’s NTT DoCoMo and Abu Dhabi’s Etisalat, but profit margins have taken a hit due to a tariff war.

“The proposal is going to be negative for the stocks in the near-term, more so because regulatory moves always create uncertainty in the market," Chawla said.

Bids for one set of all-India 3G spectrum licences have reached $3.1 billion as of Tuesday and the tender process, in which nine mobile carriers including Bharti are participating, is still on.