Spectrum refarming: Vodafone and Idea say their telecom Capex to go up by Rs 27,000 crore

Telecom Lead India: Leading mobile operators in India
Idea Cellular and Vodafone are concerned that they will be forced to spend an
additional Rs 27,000 crore if they need to shift to new spectrum.

Vodafone India says the mobile operator needs to spend
around Rs 10,000 crore if they are forced to shift to higher band frequency.

Recently, telecom operator Idea Cellular said it may have
to write-off Rs 17,000 crore if the government decides to change the
frequencies it uses to offer services upon expiry of its license.

Vodafone is threatening that the additional cost will be
passed on to consumers, leading to tariff hike.

“Vodafone estimates that apart from the write-off of
existing investments, it will cost around Rs 10,000 crore to replace its 900MHz
with an 1800MHz network,” said Vodafone India Resident Director for
Regulatory Affairs and Government Relations, T V Ramachandran, in a letter to
Telecom Minister Kapil Sibal.

The government is keen to go ahead with refarming (shifting) of spectrum and
was waiting for Telecom Regulatory Authority of India’s recommendations in this
regard to start the process and formalize it as part of the new telecom policy.

TRAI, in its latest recommendation on Auction of Spectrum, recommended that
service provider using 800 and 900 Mhz spectrum band (being used for 2G CDMA
and GSM service, respectively) to transmit signals for mobile and other wireless
services should be shifted to higher frequency band of 1800 Mhz after the
licences come up for renewal.

Ramachandran said this investment in the company’s network could have been
utilized for providing coverage to around 50,000 additional villages, according
to a PTI report.

“The investment to replace the existing 900MHz network will mean added
cost burden for the operator which will translate into higher tariffs for
consumers,” he said.

Vodafone’s licences in 10 circles are due for renewal in 2014 and 2015 and in
each of these circles, the company was given initial spectrum of 4.4 Mhz to
start its services.

As per latest TRAI recommendation, minimum price per Mhz of spectrum across
India in 1800 Mhz, being used by most of the new players for 2G services, will
be Rs 3,622 crore. The spectrum price will be double of this in 800 and 900 Mhz

Ramachandran said the company will have to install additional 20,000 telecom
towers to provide similar level of coverage, it is providing using existing
spectrum band. This will take around 3-5 years for the network to adjust with
new frequencies, he added.

The installation of each additional site would imply a significant increase in
the usage of power and especially diesel … Which would go against the efforts
of the Government for Green Telecommunications,” Ramachandran said.

Vodafone is using around 55,000 telecom towers at present to provide telecom
service using 900 Mhz band.

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