Norway's Telenor on Thursday demanded that the government slash base price for GSM airwaves by 50%, on the lines of the Union Cabinet's recent decision to halve the reserve price for CDMA spectrum. Telenor also warned it would be 'almost impossible' to participate in the upcoming March auctions at the current reserve price.
While the Scandinavian communications major is the first mobile phone company to demand that GSM-based operators be extended the same concessions as that for CDMA, its stance is set to be supported by other telcos who will soon approach the government with similar requests.
Telenor's executive vice-president and head of Asia operations Sigve Brekke in a communication to the telecom and finance ministries pointed out that leading phone companies had been steadily raising tariffs, including a fresh round of hikes on Wednesday, and said this was a result of lower competition, as high spectrum costs kept out new entrants.
The Indian operations of the Norwegian company were amongst the worst affected after the Supreme Court last year quashed all mobile permits dished out by former telecom minister A Raja. The telco, which offers services under the Uninor brand, had lost all its 22 permits, and in the recent airways sale, it was able to secure spectrum and licences in only six circles, excluding Mumbai, Kolkata and West Bengal, where it has nearly 7.5 million customers.
The Supreme Court has allowed all quashed permits to operate till February 4, the date on which it will next hear the government's petition to allow these companies to continue services till the March auctions, even in regions where they did not bag spectrum and new licences. Telenor recently said that it plans to continue its operations in Mumbai as it intended to secure airwaves in the upcoming sale.
The November auctions turned out to be damp squib with the Centre getting less than a fourth of its revenue target of Rs40,000 crore as there were no takers for about 57% of the airwaves put on sale. This forced the inter-ministerial panel on spectrum, headed by finance minister P Chidambaram, to reduce the base price for unsold GSM airwaves in the 1800 MHz in four regions — Delhi, Mumbai, Karnataka and Rajasthan — by 30%, and this panel also approved the telecom department's plan to simultaneously sell these airwaves along with a portion of spectrum held by incumbent operators before March 31.
"Upon studying the revised base price proposed for the second round, we apprehend a sub-optimal response again. An outcome where only a few operators participate under compulsion, not all spectrum gets sold and bids do not breach the reserve price, would be one not very different from that in November," Sigve Brekke's communication to telecom minister Kapil Sibal and finance minister P Chidambaram added.
With the exception of Telenor, all other foreign operators that entered India in 2008, and whose permits were quashed by the apex court, have shut shop and exited the country.
Further, Telenor sad that if it were forced to exit the Mumbai market due to higher spectrum costs, incumbents would get an opportunity to increase tariffs steeply there, adding that the 'negative impact would be higher on those with limited abilities to spend'.
Telenor was among the most vocal opponents of the 'high reserve' price prior to the previous round of auctions too. The government then reduced the base price by 20% to about Rs14,000 crore for 5 MHz of pan-India airwaves in the 1800 MHz band. Trai had initially recommended that the base price for 5 MHz of CDMA airwaves in the 800 MHz band be set at Rs36,000 crore.
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