Mobile call rates would double in some circles if the recommendations of TRAI on spectrum pricing are accepted, telecom CEOs who met Telecom Minister Kapil Sibal warned on Tuesday.

“…there will be circles which will have more than a 100 per cent price rise (in tariffs) if they were to absorb the impact of what is being recommended,” Bharti Airtel CEO Sanjay Kapoor told reporters here.

“In one circle, the cost of spectrum, the reserve price is Rs 7 crore and on other end, there are metros where it is Rs 717 crore, which is a 100 times differential,” he said.

The chiefs of Bharti Airtel, Vodafone India, Idea Cellular, Uninor and Videocon met Mr. Sibal and Department of Telecom Secretary R. Chandrashekhar to discuss the implications of TRAI recommendations.

Top officials of CDMA operators Sistema Shyam Teleservices, Reliance Communications, Tata Teleservices and CDMA body AUSPI also met the minister earlier in the day on the same issue.

Mr. Kapoor said, “The discussion was about two things — one is the TRAI recommendations made on the reserve price and auction, and basically (its saying) that the recommendations will have an impact of 2 paise on the industry, and the other was about reframing.”

TRAI has not considered the price elasticity of demand while formulating the 2 paise assumption, he said.

“As the prices rise, the consumption goes down. And it has been absolutely assumed as if the consumption will remain constant which is not correct,” Mr. Kapoor said, adding that there is a 30 paise per minute impact and not 2 paise as TRAI has assumed.

TRAI has suggested a base price of Rs 3,622 crore for one megahertz (MHz) for pan—India spectrum.

This is around 10 times higher for pan—India operations than the price at which 2G licences bundled with 4.4 MHz spectrum were allocated in 2008 under the then telecom minister A Raja.

Mr. Kapoor said TRAI has taken into consideration only 576 Mhz in the 1800 Mhz band for calculations, whereas in reality 1167.40 Mhz of spectrum is at play.

“Now the difference between what Trai has taken is three times apart because TRAI has taken Rs 93,000 crore into cognisance whereas the cost of spectrum that I just mentioned is more than Rs 2,84,000 crore,” he added.

Contrary to the telecom operators’ contention that the Telecom Regulatory Authority of India’s (Trai’s) recommendations – hiking the reserve price for the auction of 2G spectrum – will make it prohibitive to operate, an analysis of the recommendation shows that the service providers stand to gain under the new regime over the long run if they have to pay the reserve price for the spectrum.

That’s because while Trai’s recommendations enhance the spectrum fee, they also drastically reduce the proportion of revenues (to a uniform level of 1% as against the existing 3% to 7% depending on how much spectrum an operator uses) that the operators have to give to the government as user charges. Airtel, Vodafone, Idea Cellular and Reliance Infocom will gain Rs 1,20,000 crore in the next 20 years in the circles where old licences will expire between 2014 and 2016, provided their revenues grow at a conservative 12% per annum.

As the revenues earned by mobile phone operators run into tens of thousands of crores, any drop in the sharing of the revenue leads to huge savings. Take the case of Airtel, the country’s largest mobile operator. Its 20-year licences to operate 2G services will expire by 2016 in nine circles – Delhi, Kolkata and Tamil nadu in 2014, Andhra Pradesh, HP, North East and Punjab in 2015 and Karnataka and Rajasthan in 2016.

Sandeep Ladda, telecom consultant with PWC, while refusing to comment on TOI’s calculation of savings under the new licence regime, said the new scheme is regressive as it will help only the established players. It will discourage new players from entering the telecom business as the licence fees are very high. Till an operator generates huge revenues and acquires a large user base, there is no offsetting benefit and hence business becomes unsustainable. The new policy will kill competition, he said.

Under the existing norms, Airtel pays an average of 5.8% of its adjusted revenue, which is 76% of the total revenue of Rs 23,690 crore, as spectrum usage charge in these nine circles. The remaining 24% of Airtel’s revenue is from other income including sales of handsets. Under the new regime, it will have to pay only 1% of the adjusted revenue as the spectrum usage charge. This leads to a savings of Rs 1,208 crore in the first year itself under the new regime, provided its revenue continues to grow at 12%.

Over 20 years, the operator would save Rs 87,065 crore under these assumptions. At the same time, the company will have to pay Rs 19,838 crore towards licence fees, if it gets the spectrum at the reserve price.

The government today said the National Telecom Policy (NTP) 2012 will be in place by May.

“It (NTP) will be done in May. We have already said that,” IT and Telecom Minister Kapil Sibal told reporters on the sidelines of World IT Forum 2012.

“We missed the March-April deadline because the Supreme Court order came and the decision on spectrum pricing policy also took some time,” said a senior DoT official on condition of anonymity. “Now the guidelines on the unified licences have also come from Trai and have to be integrated into the policy document. Other recommendations are also expected from Trai, which will have to be integrated into the policy (before the cabinet note is prepared).”

The regulator is still working on the final recommendations on the guidelines for the spectrum pricing policy, which is expected to be a key part of NTP 2012. The spectrum pricing policy is expected to include recommendations for specific guidelines on the future allocation of spectrum, its pricing, and auction processes and methodologies.

Trai chairman J.S. Sarma had said last week the regulator would submit the recommendations by 15 April.

On Wednesday, Trai released its recommendations on the exit policy that also has to be incorporated into NTP 2012. Trai has recommended that in light of the 2 February verdict cancelling 122 licences allocated after 10 January 2008, there is no need to have a separate new exit policy.

Currently, a company can exit the telecom sector by surrendering its licences after giving 60-day notice to DoT.

NTP is a framework document that sets out the direction for the country’s telecom sector. All telecom policy decisions are taken by the government based on this. NTP 2012 will be the third instalment, after similar documents issued in 1994 and 1999.

A new NTP was first proposed as part of communications minister Kapil Sibal’s 100-day plan on 1 January 2011, and was supposed to be out the same year.

Bharti Airtel is in advanced discussions with US chipmaker Qualcomm to buy its fourth-generation licences for about Rs 6,000 crore, an acquisition that will allow the country’s largest telecom firm to quickly launch 4G services in the key markets of Delhi and Mumbai.

A person familiar with the development said the deal is likely to be closed by June and will be accompanied by technology agreements between Qualcomm and Bharti. Fourth-generation, or 4G, services offer users Internet access at three times the speed of 3G and require broadband airwaves.

Qualcomm, which had won airwaves in four regions – Mumbai, Delhi, Haryana and Kerala – in the broadband wireless auction of 2010 for Rs 4,900 crore, had begun talks to sell its 74% stake in its Indian joint venture to Bharti later that year.

But the talks were put on hold after the telecom department cancelled the US chipmaker’s mobile broadband permits last year on the grounds that it had not applied for licences within three months of the auction.

airtel-4g-in-india

Telecom major Bharti Airtel on Tuesday said it will be ready to launch 4G service in Bangalore in the next 30 days.

“We will be ready for launching it (4G service) in Bangalore in 30 days time. We have selected Huawei (as network equipment vendor) for Bangalore,” Bharti Airtel CEO Sanjay Kapoor told reporters during a conference call.

The company today announced launch of fourth generation (4G) telecom service using TD-LTE technology in Kolkata. It has selected Chinese telecom equipment company ZTE for providing technology and equipments for the service.

The company has not got approval to provide voice and sms service to users on 4G network, Kapoor said.

Airtel has selected Nokia Siemens Network for its launch in Maharashtra and is yet to finalise telecom equipment vendor for Punjab circle. Airtel has selected Pune and Chandigarh to start 4G service in Maharashtra and Punjab respectively.

The company expects that consumer will get 10 times higher broadband speed compared to the speed that people get on 3G network.

“No one can tell exact speed that can be delivered on a wireless network because various factors govern it. However, we have seen data speed of around 1.2 to 2 mbps on 3G network. The 4G data speed should be 10 times higher,” Kapoor said.

The company has announced 2 different USB dongles for accessing 4G service priced at Rs 7,750 and Rs 7,999 and three data plans ranging between Rs 999 and Rs 1,999

Eyeing 4G services roll out in India, Chinese telecom equipment maker Huawei Technologies has decided to scale up investment and operation of its Indian subsidiary.

The company, which has been supplying equipment to leading telecom operators in India, including Reliance Communications and Tata Communications, said the decision to increase investments and operations by the firm in India has been taken considering the expected launch of the 4G services within a year.

Vice President of Global Media Affairs of the telecom giant, Scott Sykes, said the revenue generation of the company from India in 2011 was $ 1.2 billion and it has set a target of 40 per cent growth in revenues from India in 2012.

Huawei India Deputy Director of Enterprise Marketing of Suresh Vaidyanathan said the company was now focussing on the roll out of 4G services in India.

“4G services are being rolled out (in India). Huawei is scaling up India operation in terms of man power, technology and investment,” he said, declining to give the details of the investment plans.

The 4G services are likely to be rolled out in some of the Indian cities later this year.

indian-mobile-future

Mobile services revenue in India is likely to reach $30 billion in 2016. The ARPU began to stabilize in 2011 from the double-digit decline of ARPU between 2008-2010.

Gartner said the India mobile subscriber base will reach 696 million connections in 2012, up 9 percent from 638 million in 2011.

Recently, the India Government said that it is targeting Rs 40,000 crore from the next round of auction in 2012-13.

“The staggering growth of mobile connections has been driven by the expansion of mobile services in semi-urban and rural markets and the availability of cheap mobile devices,” said Shalini Verma, principal analyst, Consumer Technology and Markets, Gartner.

At $40, the ARPU in India is among the lowest in the world and about one-third of that of China. The mobile service penetration in India is currently at 51 percent and is expected to grow to 72 percent by 2016. China already achieved 71 percent mobile penetration in 2011 and is forecast to grow to 119 percent in 2016.

3G is set to take toll on the financial health of Indian mobile industry. Profit after tax of Indian telecom services segment is expected to decline 85 percent in 2011-12, according to India Government’s Economic Survey.

According to Gartner, India is lagging behind emerging telecom markets in fixed broadband penetration. India’s fixed broadband household penetration was 6 percent in 2011, which is lower than the penetration in emerging markets that stood at 16 percent in 2011.

Through 3G and Broadband Wireless Access (BWA) auctions in 2010, the Indian government had pocketed Rs 106,000 crore against a revenue target of Rs 25,000-35,000 crore.

Gartner said mobile operators globally are reaping their investments in infrastructure through an increase in mobile data revenue. In India, mobile operators have significant challenges, given the nature of the emerging middle class with regards to their IT products and services spending.

4g

Mukesh Ambani’s next big idea — rollout of commoditised fourth-generation 4G telecom services across the country — is taking concrete shape.

After announcing last month that Nagpur would be a hub for its 4G operations, trials are set to begin for services at Reliance Industries’ (RIL) massive complex in Jamnagar next month, in a pilot before the project is escalated nationwide.

The megacorp is expected to begin rolling out services using the ultra-fast Long Term Evolution or LTE technology.

The company is roping in equipment vendors such as Huawei (which holds 50% of the world’s market share for LTE equipment), ZTE and Alcatel Lucent for network rollout and consumer devices.

Meanwhile, experts said the government may find it difficult to pull off 4G auctions in the next fiscal.

NK Goyal, president, Communications Multimedia And Infrastructure Association of India (CMAI) said 2G auctions are expected to be announced by December and completed by March 2013.

“So 4G auctions are expected to be announced in January and completed in another six months.”

Other industry experts also believe that the upcoming 2G auctions would see 4G auctions getting pushed to mid-next year. Which means the earlier plans of Broadband Wireless operators’ plan to roll out 4G services by mid-2012 will be postponed yet again.

According to comments filed by the company on the Telecom Regulatory Authority of India’s recent spectrum auction consultation paper, RIL has also asked for the reserve price of spectrum to beabout 7-8 times higher than the base price for 3G auctions — at around Rs25,000 crore, which would take the actual price to a whopping Rs50,000 crore. This would make it very difficult for other operators to compete in these auctions, having already burnt their fingers with 3G.

With minimal competition, RIL can take its time to decide on the 4G ecosystem, business model, pricing and services, without having to worry about meeting rollout obligations.

Explains an industry expert, requesting anonymity, “Although it is illegal for RIL to seek roaming arrangements for voice-calling with any 2G operator, global standards for FDD-LTE are to be frozen by July 2012, after which RIL can seek to offer voice services on its own network. Anyway, considering the fact that they have obtained 5 years to roll out broadband services, they have ample time to decide on their 4G game plan.”

4G is expected to provide high-speed internet browsing, high-definition video streaming, voice over LTE, location-based services and data downloads at speeds of up to 100GB per second.

However, mass-market devices for 4G are still a good 2-3 years away, said experts.

spectrum-auction

Telecom regulator TRAI is likely to come up with recommendation on spectrum auction by mid of April, Chairman JS Sarma said Wednesday.

“It should be out in the fortnight of April,” Sarma told reporters on sidelines of Convergence India 2012 in response to expected timeline for recommendation on spectrum auction.

The recommendation is expected to give guidance on key issues like base price of spectrum, amount of spectrum that should be allocated to a bidder and eligible participants, among others

He also mentioned that the Telecom Regulatory Authority of India is working on recommendations on Unified Licensing regime which should be out by end of this month.

“We have received comments of stakeholders. We are working on it. It should be out by end of this month,” Sarma said.

In the recommendation, TRAI is expected to give out detailed guidelines on Unified Licences that will be issued to all telecom companies in future and will be delinked from spectrum.

TRAI in its draft guidelines of Unified Licences has proposed a fee of Rs 20 crore for a national-level unified licence under the new regime, which suggests that there will be only four types of licences in future as against many across the communications sector, at present.

Infotel Broadband, a subsidiary of Reliance Industries, has suggested that the reserve price of the 4G spectrum should be fixed 7 to 8 times higher than that of 3G radio waves.

The reserve price for pan-India 3G spectrum had been fixed at Rs 3,500 crore.

In response to Trai’s consultation paper on ‘Auction of Spectrum’, the company said that the economic value of the spectrum in 700 Mhz band is higher than 2100 Mhz allocated for 3G services and 900/800 Mhz band allocated for 2G service.

“Based on the above comparable factors given by the Authority, the reserve price for 700 Mhz spectrum may be kept around 7-8x of 3G auction price,” Infotel Broadband IBSL said.

A senior company official clarified that the ’3G auction price’ refers to base price that government has fixed for auction of 3G spectrum in 2010.

The government had fixed cumulative reserve price of Rs 3,500 crore pan-India 3G spectrum while the reserve price of each telecom circle was fixed separately.

Infotel said that the government should follow similar practice for 700 Mhz band auction.