2.5Mhz retention has disconnected telecoms' hopes: COAI

the magnitude of the losses, the operators will consider some kind of a legal review

Rajan Mathews

Director-general

COAI

Rajan Mathews, director-general, COAI explains to CNBC-TV18 that the decision to allow the retention of 2.5Mhz in the 900Mhz-band during the re-farming process has disillusioned participants in the telecom sector.

Below is the edited transcript of the analysis on CNBC-TV18.

Q: The EGoM decision seems to be a partial relief as far as the operators like Bharti-Airtel , Vodafone and Idea are concerned. What does the decision of allowing the retention of 2.5 MHz in the 900 MHz band mean?

Mathews: This is really a non-starter for the industry because 2.5 MHz of spectrum there is really not a lot that you can do with it as a certain portion of that has to be used for administrative purposes like signaling and is extremely inefficient to retain this sliver. Operators, if they are given the choice, would prefer to give it all up and go to the 1800 MHz band because that would be the more efficient and economical option at this point.

Q: Do you think that the danger of existing network capacity of operators in the  900MHz-band becoming redundant remains given that operators will surrender their entire holdings in the 900 MHz spectrum?

Mathews: Yes, you are absolutely right. As soon as you give up the 900MHz, there is an impairment charge which we have estimated to affect the industry by about Rs 22,000 crore. So clearly operators would not prefer to do that so, what is the alternative?

If you in a situation where you are offered only 2.5 MHz of spectrum with the incremental uncertainty of whether you will be able to get more because you really don't know what the auction process is going to deliver and what the pricing will to be. So given that uncertainty, operators within a year-and-a-half will have to make some critical choices.

So this only injects more uncertainty into an already cloudy environment for operators and that's why operators will probably decide to cut their losses and take the next best alternative in the scenario.

Q3: What is the next best alternative for the affected operators given that there may not be enough in 1800 MHz spectrum?

Matthews: Clearly, Trai, in its analysis, showed that if the entire cancelled spectrum was put up for auction, there possibly wouldn't be enough spectrum in the 1800 MHz left over for refarming and it would come to a standstill. That is why they have held back some of that spectrum.

Now as you indicate, the Supreme Court will take a call on that because there is a case before the Supreme Court on this matter. But let us assume that that this auction goes forward as predicated and that the 1800 MHz of spectrum is available for refarming, the operators will look at the option with the analysis that if there is only 2.5 MHz of spectrum available in the 900 MHz, the terms and conditions of the licence have to considered as operators are entitled to an extension of their licence and not a renewal of license - both those terms have very different legal implications.

We will be looking very closely at what those legal implications are. Given the magnitude of the losses, the operators will consider some kind of a legal review.