Delay in spectrum grant irks Bharti Airtel, Vodafone India

A major tiff is brewing between the country’s top two telecom operators – Bharti Airtel and Vodafone India...

New Delhi | Published: October 6, 2014 12:43:13 pm
Bharti & Vodafone warn of disruptive services and huge call drops in three metros from next month. PTI Bharti & Vodafone warn of disruptive services and huge call drops in three metros from next month. PTI

A major tiff is brewing between the country’s top two telecom operators – Bharti Airtel and Vodafone India – and the department of telecommunications (DoT) over more than a six-month delay in allocation of spectrum which they won in February auctions.

Apart from writing letters to the DoT seeking compensation by way of interest burden on the amount they paid to the government after the auctions, sources say that the two operators are now contemplating moving court seeking a one-year extension of their renewed 20-year licence contract. Their argument is that since it takes 6-12 months to set up a network, a delay by DoT in allocating spectrum should see extension of their licence period by a year.

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Further, both the operators have warned that since in circles like Delhi, Kolkata and Mumbai where their licences is up for renewal next month, the delay in spectrum allocation could lead to major disruption of services by way of call drops. The issue assumes significance since in these circles the two operators have around 60% subscriber market share.

The issue threatens to snowball into a major spat between the mobile operators and the DoT with the other operators, who won spectrum in the auctions also seeking extension of the licence period. Already the Cellular Operators Association of India – the apex body of GSM operators – has written to the DoT to expedite the process of allocating spectrum. The operators are peeved because the allocation was delayed by around six months after the November 2012 auctions also.

The story is simple. For Bharti Airtel, the 20-year licence agreement expires in the circles of Delhi and Kolkata and for Vodafone in Delhi, Mumbai and Kolkata, next month. The two operators have their networks in these circles, built primarily on the 900-Mhz spectrum band. However, in the auctions held in February, they got a mixed spectrum in the bands of 1,800 and 900 Mhz. Therefore, the two operators would need to reconfigure their networks, which would take another 6-12 months. Further, Bharti Airtel, which earlier did not have spectrum in 900 Mhz in Mumbai, has won airwaves in the circle in this band and now needs to set up a new network in this band.

Since the DoT has not allocated spectrum so far, apart from incurring financial losses owing to the interest burden on money paid to acquire the airwaves, the two operators have not been able to order equipments, etc.

“The inordinate delay in allocation of spectrum has impacted business plans, whereby the expansion of existing networks as well as the roll-out of new networks has been delayed. We are incurring an interest burden on the upfront amount paid to DoT without being able to utilise the spectrum for any commercial gain,” Bharti said in a recent letter to the DoT.

The company has said that the delay would impact its 10.4 million subscribers in Delhi and 3.9 million users in Kolkata. “In the absence of an assignment letter, we are not able to import the equipment, leave aside reconfiguration and optimisation, which will require 6-12 months,” Bharti has said.

It has said that the Telecom Regulatory Authority of India had recommended that in case of a delay in allocation of spectrum beyond one month from the date of payment, telecom service providers should be compensated at State Bank of India’s prime lending rates for the amount paid.

Bharti had bid Rs 18,500 crore to win airwaves in 1800 Mhz in 15 telecom circles and 900 Mhz in three regions.

Similarly, in successive letters written to the DoT in the past few months over the delay in allocation of spectrum, Vodafone has said, “This (reconfiguration) is a very challenging task and it requires allotment of 1,800 Mhz spectrum at the earliest so that we are able to effect a smooth spectrum changeover with no disruption in service or deterioration in quality. Therefore, it is imperative that 1,800 Mhz should be allotted at the earliest”.

Vodafone had bid Rs 19,600 crore to win 1,800 Mhz spectrum in 11 circles and 900 Mhz in 3 circles. It paid Rs 5,600 crore as the first instalment during FY14.

Rishi Raj | The Financial Express

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