May 3, 2012 / 1:52 PM / 6 years ago

Telecoms CEOs rally against TRAI's proposals

NEW DELHI (Reuters) - Top mobile operators launched a broadside against the Telecom Regulatory Authority of India (TRAI) sector regulator on Thursday, pressuring the government to reject proposals they say will add billions of dollars to their costs and threaten the survival of some players.

In a rare show of unity, chief executives of Bharti Airtel (BRTI.NS), Vodafone’s (VOD.L) Indian unit and Idea Cellular (IDEA.NS), the country’s top three carriers by revenue, lambasted the TRAI’s proposals for a costly spectrum auction at a joint news conference in New Delhi.

“We believe that they ring the death knell for the Indian telecommunications industry, and also lead to prolonged disputes and litigation,” said Sanjay Kapoor, CEO of Bharti’s India and South Asia operations.

The once-booming sector has been beset by turmoil after a scandal over the below-market price sale of telecoms permits in a 2008 state grant process, which a state auditor said could have cost as much as $34 billion in lost revenue.

The Supreme Court has ordered cancellation of all the permits granted in the tainted sale and asked the government to redistribute airwaves through an open auction. It would be the last chance for eight carriers including Idea and Telenor’s (TEL.OL) India unit to win back their lost permits.

The sector regulator last week proposed an auction starting price that is nearly 10 times higher than that of 2008 and suggested auctioning just one-fifth of the available bandwidth, which means slots for just one or two carriers per zone.

The industry has slammed the regulator’s proposals and is lobbying hard before the government finalises the rules.

On Wednesday, the global CEOs of Vodafone and Norway’s Telenor, along with Indian tycoons Sunil Mittal and Kumar Mangalam Birla met several key ministers and government officials, voicing their concerns about the proposals. Mittal controls Bharti Airtel, while Birla is the head of Idea.

India’s captains of industry, usually a reticent lot, have become increasingly vocal, in some cases over policy paralysis and in the case of telecoms, over proposed regulations.

Earlier this year, the prime minister pledged help for the embattled power sector after several business leaders including tycoons Ratan Tata and Anil Ambani jointly met him seeking faster coal and gas development for the industry.


In addition to the high price, the regulator’s proposal for a limited number of slots risks driving up bid prices, as was the case in an auction of 3G airwaves in 2010.

    “One thing is very clear: if you create artificial scarcity then the price is not a real market-discovered price. And that is exactly what has already happened in the 3G auction,” said Marten Pieters, chief executive of Vodafone India.

    “At the most one new player will survive,” said Rajiv Bawa, chief representative officer for Telenor in India, referring to the affected companies, including his own that must win back licences to continue operations.

    The operators have demanded an 80 percent cut in the proposed price and said such a high spectrum price could bump up tariffs by up to 30 percent.

    Bharti and Vodafone also oppose a move to refarm, or substitute, their more-efficient 900 MHz spectrum bands with relatively inferior quality 1800 MHz band before their licences come up for renewal starting in 2014.

    This would mean the operators would have to buy new bandwidth and spend on networks as replacement spectrum will need more mobile masts and new equipment.

    Vodafone estimates it would have to spend nearly $2 billion on a new network if New Delhi goes ahead with the refarming. Bharti’s Kapoor said collectively the industry would have to spend billions of dollars.

    Additional reporting by Aradhana Aravindan in MUMBAI; Editing by Tony Munroe

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