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Corporate Apr 2, 2012

3G to No G: Sunil Mittal ko gussa kyon aata hai

By Aditi Roy Ghatak and Paranjoy Guha Thakurta

The sultan of mobile telecommunications in India, Sunil Bharti Mittal, is upset. He is wondering how he should rework his strategies. The Department of Telecommunications (DoT), usually rather receptive to his business aspirations, has gone ahead and signed an agreement with the ministry of defence (MoD) under which DoT will part with a chunk of the 3G (third generation) spectrum frequency band, which many of the telecom bigwigs (including Bharti) had been lasciviously coveting.

That is not all. Mittal finds that the pact he thought he had worked out with two of his industry "rivals", Idea and Vodafone, for intra-circle roaming, has run afoul of the Telecom Regulatory Authority of India (Trai). The sultan is sulking. Watching from the sidelines are the Ambani brothers who believe that it is high time the entire process of spectrum allocation be looked at afresh and that the finite (hence, scarce) national, natural resource be refarmed or reallocated.

Indeed, the telecom trio has been worried since late-2011 when it heard that Trai and DoT, not to mention the public sector Bharat Sanchar Nigam Ltd (BSNL, which has been systematically marginalised over the years by government policy), would be staunchly opposing the threesome arrangement to share spectrum and sell 3G telecom services in each others' space, courtesy intra-circle roaming that would allow the companies to offer their services even in areas (or telecom circles) in which particular companies had no spectrum.

Sunil Mittal

The triad - Bharti, Idea and Vodafone - has since been negotiating with the regulator to withdraw its objections to intra-circle roaming. The three have also threatened that they would withdraw from the 3G space if Trai failed to change its stance. A 5 March presentation on spectrum allocation by the Wireless Planning and Co-ordination wing of the DoT has brought matters to a head by virtually sealing the availability of spectrum for future assignment to the big three.

If Trai and DoT have their way, they will disallow the big three winners of the 3G spectrum auction from going pan-national through an intra-circle roaming arrangement, on the one hand, and, on the other, will also not provide the players more spectrum in the 2.1 Ghz (gigahertz) band because it would have given all the additional spectrum to the defence services because of a commitment made by DoT to MoD.

A bit of background on how the MoD comes into the picture is provided. When no one in India knew a thing about spectrum in the pre-1990s era of government control over telecom services, it was only the Indian Army, Navy and Air Force that was using electro-magnetic spectrum for wireless communications. Thanks to outdated technology, the country's defence services hogged up a great deal of spectrum, some of which got freed once technology improved. The time was considered opportune by the government to offer spectrum to private players to shore up India's rickety telecom services in the early and mid-1990s.

The advent of private sector companies using GSM (Global System of Mobile Communications) technology led to the offering of the prized 900 Mhz band for the first, second and third cellular licences for the four metros and the state telecom circles. Between them, they completely exhausted the 900 Mhz band. The fourth cellular licence was offered in the 1,800 Mhz band, earlier the exclusive domain of the defence services. The unused spectrum in the 1,800 Mhz band was carved out for private players.

A twist in the story comes here because a portion of the 3G spectrum - 1,920Mhz to 1,980 Mhz - that falls within this band also falls within the block of 1,700Mhz to 2,000 Mhz, used by the defence services (see chart).

The DoT wanted the extra spectrum released by the MoD for both 2G and 3G services and, accordingly, signed a memorandum of understanding (MoU) with the MoD in May 2009 for release of 2G and 3G spectrum linked to the laying of an OFC (optic fibre cable) network, which the DoT had promised to deliver to the defence services for its internal communications requirements in return for vacated spectrum. As per the MoU signed between the two ministries, the defence ministry had agreed to vacate 25 Mhz of 3G spectrum and 20 Mhz of 2G spectrum, in phases.

The MoU could not be executed because BSNL, which was supposed to build and implement the OFC project for the MoD, did not get the requisite funds - estimated in October to be Rs 14,000 crore (see box on the next page).

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