The government’s decision calling for applications regarding the new Universal Access Service Licences (UASL) for telecom services, has every possibility of turning into a no-holds-barred fight to corner scarce telecom spectrum between two groups of mobile service providers: the GSM (Global System for Mobile) lobby and the CDMA (Code Division Multiple Access) lobby. The decision has also created a major rift between the existing players and new entrants.

The mad rush for telecom is loud and clear. After last date for application closed in the previous week, there were 30 new applicants who have put in 300 applications, said the Union Communication and IT minister A Raja at a recent function. But a source in COAI (Cellular Operators Association in India), representing the GSM lobby, told Deccan Herald that close to 600 applications have been received by the Department of Telecom (DoT).

Though the government is keeping mum on the numbers, the lobbying activity is hotting up. Raising alarm of deceptive intentions of the applicants, COAI has already sent their objections to the government. It urged that existing GSM operators, who were to get additional spectrum as per government’s telecom policy nearly a year ago, must get the priority in spectrum allocation over the new applicants. They also expressed doubts about the real intention of many of the applicants. The CDMA lobby, represented by Association of Unified Telecom Service Providers of India (AUSPI), is likely to send their view soon. (See box: Squabble over telecom)

Lure of bandwith
Meanwhile, the DoT has formed two committees. One to scrutinise the background of applicants amidst suspicion that many could actually be fronts for some established players targeting to get some additional spectrum by proxy. Another will identify non-serious players who might have entered the fray just to corner some spectrum.

As scarce spectrum, the lifeblood for mobile business, can fetch huge price when sold, the government fears that many intend to do just that. “Spectrum trading can be very lucrative when there is a tremendous shortage of it.
No wonder so many have jumped into the well in search of gold” said a Senior Executive of a mobile service provider in Bangalore. 

The mad rush
The barrage of applications for UASL has even taken the DoT by surprise, as it never expected such a huge response. The diverse profiles of the applicants have also left everyone bewildered. Though the list of applicants has not yet been released by DoT, the available names through the media makes an interesting reading. Apart from global giants like AT&T, there are real estate biggies - DLF, Omaxe, Parsvanath, BPTP and Ansals, steel majors like Ispat Group and Jindal Steel, IT companies Sify, Moser Baer, BPL, Tulip and e-network Solutions, and traditional industrial groups like the Dalmias, the Sterlite group etc. Even the Essar group which is a 33 per cent partner in Essar Vodafone, has applied for 22 circles independently. The sudden explosion of interest has naturally alarmed the existing players. COAI in a presentation made to the Minister A Raja, has demanded “Rigorous scrutiny” of all applications to “Weed out non-credible applicants” and “Ensure strict enforcement of cross holding restrictions as provided under    licence.” According to COAI Director General T V Ramachandran, the GSM industry has also pleaded with the government to ensure entry of only “Serious and committed” telecom players. “These could include conditions like prior telecom experience, mandatory lock-in period etc,” he said.
COAI has also demanded that licence applications of new GSM operators pending since December, 2006 must get higher priority against new applicants.

Untenable claims
However, the CDMA industry is opposed to COAI’s demands. They think that the GSM players are privileged by virtue of their early entry and want many more licences to be granted in each telecom circle to break the monopoly of large players. “The success of the telecom industry depends on competition. The rates for mobile calls have come down from Rs 16 to around rupee one now, and that has happened as different technologies have come in, the downswing of tariffs always being led by the CDMA operators like Reliance. The claims of GSM lobby is totally misleading and is aimed at grabbing spectrum only for GSM operators,” a top CDMA Industry Representative told Deccan Herald.

AUSPI Secretary General S C Khanna, while pointing out that the CDMA industry had raised its concerns regarding the spectrum issue with TRAI, says that it would formally make its viewpoints known to the minister in the next few days. It is expected that the CDMA operators would urge the government to go ahead with the licencing process without paying heed to COAI’s demand for what they termed “Preferential treatment.”

Treat all as equal
As one CDMA industry representative puts it, “It is not as if the government is going to give licences like in the days of Licence Raj. It will give licence after checking so many criteria and we are sure it would not go to any Tom, Dick or Harry. As far as the contention of COAI about ‘Non-serious’ applicants is concerned, well if the licences are given without any spectrum, none of them would anyway persist. Also, to start a pan-Indian network, one needs to invest around Rs 30,000 crore, if you don’t have it, you won’t spend Rs 1,500 crore just to get the licence.”

Wrong presumptions
COAI has also raised concerns over the “Erroneous” criteria recommended by Telecom Regulatory Authority of India (TRAI) for spectrum allocation. “It was pointed out that the ad hoc and enhanced subscriber linkage criteria recommended by TRAI are based on assumptions that are incorrect, technically flawed and impossible to achieve and further that the calculations made to arrive at this criteria,” Mr Ramachandran says. Among the points raised by COAI are that TRAI had not taken into account “The fact” that actual spectrum requirements is governed by the hot-spot areas in big cities and also the grade of service requirement. On the other hand, AUSPI says that a licencee using one technology may be assigned additional spectrum meant for another technology under the same licence, something which the GSM operators oppose.

AUSPI also says that the roll out obligations in the licence agreement do not serve any purpose. “It is a road block like an ‘Inspector raj’ where service providers depend on agencies in order to roll out the network to meet the obligation,” AUSPI said in its response to TRAI’s recommendations. 

However, the fact is that mobile telephony is an industry that is attracting all and sundry because of its immense growth in recent years. While the DoT now has a difficult task identifying genuine applicants, the issue will finally boil down to the allocation of spectrum. More so because the Defence Ministry has been refusing to release additional spectrum citing the security aspect.

SQUABBLE OVER TELECOM LICENCE
Demand of  GSM players
*Impose a five-year lock-in period so that promoters cannot sell their stake

*Allocate spectrum for new and existing circles on a first-come first-served basis

*nIncumbent GSM operators with pending licence applications must be given priority for licence and initial spectrum issues

*Many new companies have applied for license hoping to sell spectrum at a hefty price. Some of them may be fronts for others. This is the result of faulty TRAI recommendations

*Scrutinise all applications to weed out non-credible applicants. Strictly enforce crossholding restrictions

Demand of CDMA players

*Competition is needed, so give licence & spectrum to more companies

*Licence allocation should be from the point of view of level-playing field

*Many of the applicant non-telecom companies are well established and their credentials should not be questioned

*Stringent government criteria to give licence will ensure tranparency. There is no chance of ‘non-serious’ or ‘front’ companies getting licence

*Licence fee of Rs 1,500 crore will deter non-serious players

*If spectrum is not given immediately, non-serious players would move out