The telecom Companies now gear up for another round of intense competition as the telecom ministry giving the nod for mobile number portability. This means that any subscriber could switch service providers and keep their existing number intact. The necessity to keep the same number is considered one of the biggest factors for subscribers to stay with the service provider, despite being unhappy with the service. It is quite likely to expect a huge churn amongst players, as subscribers would start shifting. Clearly cost of customer acquisition and retention is bound to rise. The scheme would be introduced in a phased manner with the metros being the first off the block. And the first battle field will be crucial as data suggests that metros account for a large chunk of high value users. While the metros account for a significant 18% of the subscriber base, metro subscribers account for as much as 25% of the revenue. In this light the threat can be significant. Sections of the telecom industry point out that number portability has not worked out in many countries. However, India is a different market, reckon analysts, as it does not have a service and handset bundling system that ensures long term contracts with subscribers. And this was one of the biggest deterrents for successful number portability implementation. A Kotak Institutional Equities report cites the example of Finland, which has a similarity to the Indian market, and mentions that on implementation of number portability, the churn increased significantly.

ARPU for Telia Sonera, the largest operator in Finland, declined 16% within four quarters of the launch of portability. Similar trends can be expected in India and that too before portability is implemented (likely December 2008), reckon analysts. Here, Companies like Bharti, Idea and Vodafone, with large presence in the metros are likely to witness most of the intensity. RComm might just get away because CDMA subscribers will find it prohibitive to shift to GSM. Moreover, RComm will be a new entrant in the GSM market and will be in a position to poach from the incumbents.

—Contributed by Akash Joshi

Source: The Financial Express

Spectrum war: Telecom sector faces uncertain times


15 Nov, 2007, 1038 hrs IST, Shalini Singh, TNN

NEW DELHI: From the look of it, new applicants for telecom licences are likely to turn as aggressively litigant as incumbent players in the business. The trigger, industry analysts say, are the varying and conflicting interpretations of the government's first-come-first-serve (FCFS) policy.

The original understanding of FCFS related to incremental spectrum for existing operators based on rollout/subscriber-linked criteria. The agitation has only deepened since Monday's TDSAT hearing of COAI's legal opposition to the governments' spectrum allocation policies. At the hearing solicitor general Ghulam Vahanvati outlined four different priorities under FCFS, which have stirred up a hornets nest.

According to SG, existing GSM licensees who have applied for additional spectrum, subject to certain criteria, are the first in line for spectrum under the FCFS policy. But in the absence of an agreement on the criteria, this in turn, affects the priority. Existing GSM operators face stiffened subscriber thresholds, both on account of Trai's and the TEC's recommendations.

Second in line are the 22 licenses issued in December 2006 (Aircel 14, Idea 2, Vodafone 6) that are awaiting startup spectrum.

Companies such as Reliance, which have paid the Rs 1,651 crore fee under the crossover technology policy of October 19, come next. Since the policy has been challenged, its acceptance or removal will again affect the FCFS list.

Last in priority are the 46 new applicants who filed 575 applications by October 1. However, there is a complete divergence of views on what constitutes FCFS within this category.

New applicants offer three different versions of FCFS. Applicants like Idea, Spice, HFCL and Parvsnath who are ahead in the queue, believe FCFS is determined by the date of application. But Trai chairman N Mishra has disagreed with this interpretation.

The second group of applicants includes India Bulls, Shyam Telecom and the Oswals. These come immediately after the first six and are within the September 25 cutoff date. They say FCFS is determined from the date of application of spectrum, post deposit of fees and not date of application.

The last set of applicants includes DLF, Sterlite, Videocon, Moser Baer and AT&T . As they have been left out of the September 25 cut off date, these firms say FCFS should translate into simultaneous LoIs to all, with winners determined by the speed at which they pay/apply for spectrum.

Parliament to take up 2G spectrum issue

Following media scrutiny, court cases and multiple letters to Prime Minister (PM), it is now the turn of the Parliament to debate pricing and allocation method for 2G spectrum.

This comes as a result of a calling attention motion filed by Rajeev Chandrasekhar, Rajya Sabha MP and former chief of BPL Mobile. Based on the motion on issue of 'Process and terms of sale of defence spectrum to private telecom operators' , communication minister A Raja has been asked to make a statement on 22 November.

Chandrasekhar additionally wrote to the PM on Wednesday, asking his government and Raja to defend two issues. First, Chandrasekhar asks for the government's estimate of the present commercial value of spectrum (that is being recovered from the defence ministry), questioning why the government and the ministry is levying charges for spectrum that were discovered through a tender process six years ago in 2001. Two, he has asked why the tender route is not being followed again.

Source The Economic Times

Raja rules out auction of spectrum

NEW DELHI: The communications ministry, on Thursday, put the last nail on the coffin of the ongoing uncertainty over the allocation methodology for 2G spectrum. In a written reply to the Rajya Sabha, communications minister A Raja ruled out selling or auctioning 2G spectrum and said that radio frequencies would continue to be allotted based on the subscriber base of the telcos.

In yet another significant announcement, Raja said that telecom licences to new applicants will continue to be given as per the existing policy of first-come-first-serve. This implies that only a select few, or a maximum of three or four of the 45 new applicants, stand a chance to launch cellular services in India.

"The government has decided to grant new Unified Access Services Licences (UASL) as per the existing policy. Selling or auction of 2G spectrum is not envisaged under telecom access services licences," Raja said while replying to a query from Rajya Sabha MP and former chief of BPL Mobile Rajeev Chandrasekhar.

Replying to another query, the minister of state for communications and IT Shakeel Ahmad said that additional spectrum for all telcos is allotted ‘taking into account the subscriber-based eligibility criteria and subject to availability of spectrum in the telecom service area’.

He said that a committee has been set up to recommend the revised subscriber-based spectrum allocation criteria for allotment of 2G spectrum. Responding to a question on the policy for new licences, Ahmad said: "The government has decided to grant new UASL as per the existing policy."

The existing policy envisages that GSM operators get 4.4 MHz of spectrum and CDMA players get 2.2 MHz of radio frequencies bundled with the telecom licences for all circles. Additional spectrum is then allotted subject to operators meeting pre-defined subscriber base targets. The minister also added that the government had not issued letters of intent (LoIs) to any of the new applicants. "No letter of intent for UASL has been issued after March 5," he added.

In fact, Raja, in an earlier communication to PM Manmohan Singh, had already clarified the reasons for not auctioning 2G spectrum. "The issue of auction of spectrum was considered by the Trai and the Telecom Commission and was not recommended as the existing licence holders who already have spectrum up to 10 MHz per circle got it without any spectrum charge. It will be unfair, discriminatory, arbitrary and capricious to auction the spectrum to new applicants as it will not give them level playing field," he had told the PM.

Telecom regulator Trai, in its recent recommendations, had proposed that telcos increase their respective subscriber base between two and six times before they are granted additional spectrum. This was challenged by the Cellular Operators Association of India in the telecom tribunal.

It resulted in the department of telecom (DoT) asking its technical arm — Telecom Engineering Centre — to come out with a fresh report on the spectrum allocation norms, and later in its report suggest that telcos increase their subscriber base between four and 15 times before they are granted additional spectrum.

Confronted with stiff opposition from the GSM lobby, the DoT last week announced that it would set up a fresh committee with industry representation to review the TEC report, indicating that the recommendations made by the TEC could be relaxed. The COAI, however, filed a fresh affidavit in the telecom tribunal challenging the TEC report despite two of its members — Aircel and Spice — opting out of its earlier petition. Ahmad also informed Parliament that the matter (the new spectrum allocation recommendations) was sub-judice in the telecom tribunal.

Source The Economic Times