Telcos grow despite spectrum crunch

NEW DELHI: India's mobile operators have added a record 100 million plus customers during the last nine months. But, the world's fastest growing cellular market witnessed this growth, the highest ever globally, despite telcos not being awarded additional spectrum. Spectrum or radio frequencies is the life line for all mobile operators. The Department of Telecom (DoT) last awarded airwaves to operators in March 09 and it may well be several months more before the country decides on the methodology for all future allocations. This implies, operators here will not receive any airwaves in 2009-10.

Some Indian operators, especially dual technology licence holders such as Reliance Communications and Tata Teleservices - are of the view that the sector's performance over the last three quarters only exposes the 'bluff' of incumbent players who have complained for years now that the slow pace of spectrum allocation, or lack of airwaves would bring the country's rapidly expanding telecom market to a halt.

But, not all players share this view. A CEO of a large GSM operator had recently told ET that the airwaves crunch had forced the company to set up towers or cellsites within every 150 meters in metros such as Delhi and Mumbai. Several operators, who did not come on record, due to the sensitivity of the issue, pointed out that mobile companies' capex and opex in metros and large cities had gone up by 10-20% over the last couple of months as they have been 'forced to install additional equipment' to deal with the rising cellular traffic in the absence of the Centre dishing out additional airwaves to them.

"Our executives are constantly on the road, travelling through all parts of cities like Delhi to check signal strength. Operators are increasingly being blamed for call drops and deteriorating quality of services even as the raw material for our services - spectrum - has not been provided," the CEO of this GSM telco added.

Vodafone Esssar, India's second largest GSM telco, in a recent communication to TRAI has pointed out that the total spectrum made available to the mobile industry in India is half to two-thirds of the spectrum made available to the industry globally. "This situation has already driven the industry to the brink, with roughly one quarter of the average spectrum allocation of international operators despite higher customer bases. Benchmarking shows that Indian spectral efficiency is probably the best in the world," Vodafone Essar had added.

Another executive with a GSM telco pointed out that 60% of the new cellular additions over the last 10 months were from rural India where there was no spectrum crunch. "The problem is in the metros and cities - it is therefore incorrect to state that we added over 100 million customers despite the crunch when no airwaves were awarded," this executive said. "Rural growth will continue, but in urban India, if the industry's concerns are not addressed, the skyline across our cities will only have telecom towers," this executive added.

In March 09, the DoT had frozen all fresh allocations of 2G spectrum after a government-appointed spectrum panel said the country should adopt the internationally accepted auction system for issuing additional airwaves to telcos. Currently, all mobile services offered in the country-except select offerings by state-run BSNL and MTNL-are provided using 2G spectrum. So far, spectrum was awarded to telcos based on their subscriber numbers. Put simply, additional radio frequencies are dished out to telcos as they added more subscribers and India was the only country that followed this controversial practice of allotting airwaves every time telcos reached certain pre-defined customer numbers in each circle. The DoT has referred this spectrum panel's report to TRAI, which is expected to issue its recommendations on the future methodology to be adopted to award airwaves to telcos by mid-January 2010.

At the same time, the sector's growth will also strengthen claims of companies such as RCOM and Tata Teleservices, who have constantly been maintaining that licence conditions stipulate that GSM operators such as Bharti Airtel, Vodafone Essar and Idea Cellular are entitled to only a maximum of 6.2 MHz of airwaves in every circle.

"It has been over nine months since any operator has been allocated 2G spectrum by the government, since there is none for the government to give-it is preposterous, given this backdrop, that three GSM incumbents continue to hoard up to 10 MHz of GSM spectrum in many of the Circles they operate in. The irony is that while they speak of a spectrum crisis, they continue to show strong subscriber additions, which, in itself, required spectrum to service. If the additional spectrum they are hoarding against 'contractual terms' is allocated to two other operators, the government will end up getting 1% higher spectrum usage charges for the same amount of spectrum-this is a loss of thousands of crores for the exchequer," the Tata Telservices spokesperson said.

RCOM too in a recent communication to TRAI had said that even as (incumbent GSM telcos) claim capacity constraints, they continue to solicit more customers.

RCOM also pointed out that 'incumbent operators have completely ignored the fact that in areas where they claim they are so-called spectrum constrained e.g. in urban, metro circles, their network minutes are flat or in some cases, in steady decline. "Most metro areas have reached 100% penetration; subscriber growth going forward will be led by the marginal customer with limited calling minutes through the phenomenon of multi-SIMs. A review of the network minute trends for incumbent GSM networks shows this impact already. The need for GSM spectrum is going to be further diminished with the arrival of 3G. Also, as the new entrants launch their networks in urban and metro areas, their growth will be from churning customers away from incumbent networks," RCOM's communication added.

Dual licence holders also say that spectrum constraints can be addressed by adopting technology enhancement features already available in the market and add that the examples of other countries holding more spectrum cannot be used in India since these airwaves were allotted to them in early 1990s when the GSM technology was new and most of the capacity enhancement techniques were not available. According to the Association of Unified Service Providers of India (AUSPI), the industry body representing the like of Tatas and RCOM, has said that GSM spectrum efficiency enhancement technology features results in decreasing the interference and increasing the soft capacity to make the services affordable with just 6.2 Mhz of GSM spectrum per circle.

GSM operators dismiss the technology argument and say their sites already operate at maximum efficiency even as their towers are located at minimum intersite distances. They also added that globally, no international network has ever managed to have customer numbers as in India with as little radio frequencies. Incumbent GSM operators have said that if airwaves are capped at 6.2 MHz/circle, then they would require '17 sites per operator per each sq km'. At 12 operators per circle, and with two operators sharing a tower, this would require 102 sites for each 100m by 100m area, as per their calculations. Even if a tenancy ratio of 3 could be achieved, this would require 57 sites per sq km. Neither of these are achievable in practice. This is simply not a realistic set of assumptions for network deployment. Even if it were achievable, it would not be desirable given public concern over the environment impact of sites in urban centres," they add.

The Bharti Airtel spokesperson however slammed the likes of RCOM and Tatas and said that 'such statements that the existing telecom operators are hoarding more spectrum are only malafide and to confuse the general public'.

"All spectrum allocations have been made strictly as per the applicable guidelines, prevalent from time to time. The government has prescribed the criterion up to 15 MHz. Moreover, the current criterion came after the signing of the new GSM licence agreement and the alleged operators are very much aware that the current spectrum criterion allows the operators to obtain the spectrum up to 15 MHz. Moreover, the existing spectrum charges have also been prescribed up to 15MHz and the operators are being charged based on the allocated spectrum," the Bharti Airtel spokesperson added.