Telecom body COAI plans legal option to get out of Rs 60,000 crore hit on operators due to partial spectrum refarming

Telecom Lead India: Cellular Operators Association of India (COAI) may consider legal options to oppose the Government’s move for partial spectrum refarming that will force mobile operators to spend Rs 60,000 crore Capex.

Rajan S Mathews, director general, COAI


Rajan S Mathews, director general, COAI, told “TRAI (Telecom Regulatory Authority of India) and DoT (Department of Telecommunications) did not give enough attention to this significant issue that matters to the entire industry and consumers. We are considering legal options. But we will wait for more clarity on the issue.”

Telecom operators such as Bharti Airtel, Idea Cellular and Vodafone are opposing spectrum refarming. They feel that these decisions are part of the government’s move to make money from telecom industry when the industry is reeling under pressure.

Partial spectrum refarming as approved by the EGoM on Thursday could result in a detrimental impact on consumers through higher prices as well as poorer quality of service. “It will also not provide the financing relief the industry desperately needs to be able to reduce industry Debt to EBITDA margin ratios, which, at around 5, are currently too high,” said Mohammad Chowdhury, Leader Telecom, PwC India.

Bharti Airtel CEO (India and South Asia) Sanjay Kapoor on Wednesday said the present telecom tariffs are unsustainable for the mobile industry which is facing intense competition.

The telecom industry has been saying that as a result of the high base price of spectrum for the upcoming auctions, call rates will rise by 30-40 percent.

The telecom industry will face pressure due to several factors. The government fixed base price of Rs 14,000 crore for 1800 Mhz band and Rs 18,200 for 800 Mhz. Despite the base price, Idea Cellular is getting ready to spend more than Rs 7,000 crore for buying spectrum.

Though several Indian operators have lined up with their funds, spectrum auction in November 2012 will not see any participation from any foreign operator.

Besides the base price, the Empowered Group of Ministers (EGoM) has recommended to impose a one-time fee on existing mobile operators for excess spectrum.

Industry is reacting sharply to the decision of the Empowered Group of Ministers (EGoM) that said phone carriers will have to give up their airwave holdings beyond 2.5 mega hertz of spectrum in the 900 mega hertz band at the time of their permit renewals. The operators who hold upto 2.5 spectrum will have to pay the auction determined price for holding on to the spectrum.

The EGoM, headed by telecom minister Kapil Sibal, also recommended that during the merger and acquisition (M&A), the acquirer will have to pay the auction determined price for the spectrum held by the company being acquired.

[email protected]