Global Insight Perspective | |
Significance | Nine companies, including two newcomers, will be awarded telecoms licences to offer both fixed-line and mobile services in designated circles. |
Implications | These companies are being given the opportunity to tap the remaining growth potential in the Indian telecoms market. |
Outlook | However, spectrum bottleneck could delay the introduction of services by new players. The same issue could also affect the introduction of 3G. |
The DoT said it had issued letters of intent to nine companies for the award of Unified Access Services (UAS) licences, under which licence holders can provide fixed-line, mobile, as well as internet services in the designated areas. The nine companies include industry newcomers, such as property developer Unitech and Datacom Solutions. The winners also include companies such as Idea Cellular, Spice Communications and Shyam Telelink, which already offer GSM mobile services in selected areas. The other companies receiving letters of intent are Tata Teleservices, S Tel, Swan Telecom and Loop Telecom. In independent filings to the Bombay Stock Exchange, Unitech said its units had received letters of intent to issue pan-India telecom licences for an entry fee of 16.58 billion rupees (US$422 million), while Datacom Solutions said it would be awarded pan-Indian licences for a fee of about 15 billion rupees. Idea Cellular—the country's fifth-largest mobile operator and fourth-largest GSM operator—said it had received the approval for expanding operations in nine telecoms circles, while Spice Communications, which currently offers GSM services in two circles, said it was allowed to operate in four new circles.
Separately, the Economic Times has reported that the DoT has also cleared applications from Idea Cellular, Vodafone Essar and Aircel to be granted 2G spectrum in circles where they currently hold licences, but have not been allocated spectrum to launch services. This implies that Idea, which already has operations in 11 telecoms circles, will be able to expand its footprint to 13 circles, while Vodafone Essar, which has operations in 16 circles, and Aircel, which offers services in nine circles, will be able to expand their footprints to 22 telecoms circles. In addition, the newspaper said the applications of some existing GSM operators, such as Bharti, for additional spectrum in the circles in which they already operate have also been cleared. Some of these applications have been pending for nearly two years.
Outlook and Implications
- When Spectrum to be Released: Although the latest moves by the DoT are generally perceived as another step to increasing competition and driving the growth of the Indian telecoms market, a key question remains: when will the operators actually receive their spectrum? Despite numerous promises over spectrum allocation, it is questionable whether the government has sufficient spectrum to hand out. The country's defence forces occupy an unduly large amount of spectrum, and, unsurprisingly, they have been reluctant to release their grip on those resources. Despite continued negotiations between the telecoms authority and the army over releasing unused spectrum for telecoms use, there is no indication that the issue will be resolved in the near future.
- Spectrum Crunch: The Indian mobile market, particularly the GSM sector, is booming. The country is adding an average of 8 million mobile subscribers in a month, with the total mobile subscriber base having exceeded 220 million. However, with such a tremendous growth rate, the spectrum that has been allocated by the DoT to existing mobile operators is no longer enough to carry calls crisply and reliably. The Indian operators, led by the country's leading mobile operator, Bharti Airtel, have complained that they face a “spectrum crunch”, particularly in some major cities. In India's two biggest cities, Delhi and Mumbai, for instance, the spectrum crunch has caused poor service quality, with mobile users often suffering dropped calls and patchy reception. In these areas, the existing operators are, therefore, in urgent need of additional spectrum.
- A Longer Wait for 3G: The government has earlier announced its intention to introduce 3G to the country and has earmarked space in the spectrum for 3G networks. However, it is still unclear as to when 3G licences will be issued. Nevertheless, its decision to allow both existing operators, as well as newcomers and even foreign players to join the bids for 3G licences has not been received well by the existing players. Given that mobile penetration in the country is only at around 20% and the average personal income is still relatively low, the primary focus of the Indian mobile operators should theoretically be to expand the coverage of their 2G/2.5G services, particularly into the rural markets. However, given the Indian operators are in urgent need for additional spectrum to serve existing customers and expand service coverage, an early release of 3G spectrum by the government could help alleviate the spectrum crunch faced by the operators.