Friday 18 May 2012
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.
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Reliance Communications – the second largest mobile operator in India based on users – claims 2.8 million active 3G users, the highest in India.
Idea Cellular has 2.25 million 3G users. While around 30 percent of 7 million 3G users of Bharti Airtel are active, according to media reports.
India’s total 3G user base is around 10-12 million.
Recently, Reliance Communications has started 3G services in more than 333 towns in all the 13 circles RCOM have won spectrum.
Idea Cellular has provisioned 3G services for more than 5 percent of its existing 106 million customer base. Idea as on 31st December has more than 2.25 million active subscribers on 3G platform in the month of December with an average usage of 235 MB per month and 3G Data incremental ARPU at Rs 79.
Vodafone India, which launched commercial 3G services in February last year, saw a huge surge in data revenues, which grew by 29 per cent Rs 647 crore. The company provides 3G services in 683 towns and cities across 20 circles. Its total data customers accounted to 31.2 million by the end of December. That was 21.5 per cent of its total subscribers of 144.9 million.
Government has given major shock to the telecom industry as the Telecoms players including Bharti, Airtel, Vodafone, Idea might have to pay Rs 37,000 crore for the excess spectrum that they hold.
It has been expected that a draft Cabinet note will be finalised within a week and a decision will be taken in the next two weeks, sources claimed.
If any telecom players are holding spectrum in excess of 6.2 megahertz, then they will be charged.
According to IBN Live a draft Cabinet note is set to recommend the same, and “sources say that the draft is expected to be finalised within a week; a decision on this is likely in the next two weeks. ”
Wireless subsystem manufacturer Kavveri Telecom Products Ltd. said its subsidiary Kavveri Telecom Infrastructure Ltd. had signed a long-term agreement for ten years with the tenth operator, who is one of the major Pan India cellular operators, for in-building wireless solutions.
This agreement will pave way for substantial long-term revenue source for the Kavveri Telecom Infrastructure, it said.
With long-term agreements of this nature, Kavveri Telecom Products will supply the products to Kavveri Infrastructure as per the agreements with customers. Its customers include all the leading operators and OEMS including Ericcson, Alcatel Lucent, Nokia Siemens Networks, RCom, Airtel, Vodafone, Idea, Aircel, BSNL to name a few.
Commenting on the agreement, Kavveri Telecom Products Managing Director Shivakumar Reddy said, “Given the high costs of setting up towers and the loss of signals within enclosed areas and to provide capacity and coverage enhancements within large buildings, in-building wireless solutions is the way forward for the operators. As pioneers and leader in this field we aim to maximize our reach.”
Vodafone, Idea, Airtel in pact for pan-India 3G services
In an undeclared roll-out of inter-dependency in the highly competitive telecom market, three major telecom players – Vodafone, Idea Cellular and Bharti Airtel – have entered into agreements to provide pan-India 3G services.
The three will now use each other’s networks through intra-circle roaming arrangements where they do not have licences.
Airtel, Aircel and Reliance Communications each own 3G spectrum licence in 13 of the 22 telecom circles, while Vodafone, Idea and the Tatas each have licence in nine circles.
The communication further explained: “With this agreement, Vodafone / Airtel / Idea will bring a pan-India experience of 3G services to their customers.”
A report on GSM, 3G and 4G in India by TELCOMA Technologies
A Report on
- The Indian telecom market segmentation
- Top 15 operators in india by subscriber count
- Result of India’s 3G spectrum allocation – circle & operator wise
- GSM in India 2011- 2013Predictions
- 3G in India 2011-2014 Predictions
- 3G/4G updates and news
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REPORT ON CURRENT AND FUTURE WIRELESS (GSM AND 3G) TRENDS IN INDIA
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