Low spectrum fee to come with a rider

15 May 2009, 0643 hrs IST, Joji Thomas Philip & Sandeep Gurumurthi, ET Bureau

NEW DELHI: Leading GSM operators such as Bharti Airtel, Vodafone Essar and Idea Cellular are confronted with a catch-22 situation. The Department of Telecom (DOT) will soon announce a reduction in spectrum usage charges to a uniform 3% of the telcos’ annual revenues. But, only those GSM operators who agree to pay a one-time fee for all excess radio frequencies they hold beyond the 6.2 MHz mark will be eligible for this reduction.

As per the current policy, all telcos share 2-6% of their annual revenues with the government as a fee for using the radio frequencies allotted to them. Spectrum or radio frequencies airwaves is the lifeline for telcos as all communication signals travel on these airwaves.

Further, the catch is, this one-time spectrum fee must be equivalent to the market value of the extra radio frequencies. The committee, set up to resolve all spectrum related controversies, has said that this onetime charge must be established through the upcoming 3G (third generation) airwaves auctions. For instance, if Vodafone Essar has been awarded 2 units of radio frequencies in Delhi & Mumbai beyond the 6.2 MHz mark, it will have to pay a fee equivalent to what the same amount of airwaves fetched during the 3G auctions in these two metro cities to enjoy a lower spectrum usage fee. In such a scenario, Vodafone will share 3% of its revenues from Delhi and Mumbai as against 6% at present. At present, the mobile services offered by all private GSM operators are done via second generation (2G) airwaves. India will soon auction 3G airwaves that will enable its operators to offer high-end services such as ultrafast internet, video conferencing, interactive gaming amongst other services. The panel’s report also adds that this one-time charge should be paid within two months of price discovery (through 3G auctions).

The larger implication is that GSM biggies such as such Bharti Airtel, Vodafone Essar & Idea Cellular, Aircel Cellular and others who hold airwaves beyond the 6.2 MHz mark in several regions across the country will soon have to decide if they want to continue with the present regime and pay a higher levy as against paying this onetime charge and enjoying a lower revenue share rate.

Some of the GSM operators said that they would comment only after unveiling of the new spectrum policy. An industry executive linked to a GSM operator said that ‘if such a clause were to be part of the new policy, telcos would adopt mixed approach’.

“In some circles, where the 3G price discovery may be low, GSM players will opt for this one-time fee, while in other regions, they are likely to continue under the existing regime,” the executive added.

Fewer users sign up for GSM in April

14 May 2009, 0350 hrs IST, ET Bureau

NEW DELHI: GSM telecom operators in India recorded a lower number of subscriber additions of 8.9 million in April as against 10.8 million in March, led by a sharp dip in monthly additions by state-owned telcos BSNL and MTNL. BSNL added just over 1 million users in April as against over 2.5 million in March. The total GSM subscriber base now stands at 297.7 million, Cellular Operators Association of India (COAI) said on Wednesday. The subscriber base data for Reliance Communication was not reported.

Another state-owned telco MTNL, which operates in Mumbai and Delhi, also saw a dip in monthly additions with about 45,553 users in April compared with 92,097 users in the previous month. Both MTNL and BSNL now have a subscriber base of 4.2 million and 47.7 million, respectively.

Airtel led the number of additions made by the GSM operators in April. Inching closer to the 100 million subscriber-base mark, market leader Bharti Airtel added 2.8 million users in April compared with 2.8 million in March, taking its total subscriber base to 96.7 million.

As a result, Bharti Airtel continues to lead the GSM market with a market share of about 32.5% followed by Vodafone Essar with 24.03%. Vodafone Essar, the second-largest private GSM player, reported a total subscriber base of 71.5 million with about 2.7 million users added during April. It added lesser number of users in April compared to March, when it saw close to 2.8 million new users, as per data compiled by COAI.

Aircel, which recently launched its services in Delhi, added over 1.1 million subscribers all India. The operator now has about 19.5 million subscribers in its portfolio. Idea Cellular also added about 1.1 million subscribers during April, taking its total subscriber base to 44.1 million.

(Excerpt from India adds 8.9 mn GSM mobile users in April, 13 May 2009, 1542 hrs IST, REUTERS, reported on ET)

Reliance Communications, which had 72.67 million subscribers at end-March, expanded its GSM mobile services to all the service areas of the country in January, but the majority of its customers are still on rival CDMA technology. Tata Teleservices, in which Japan’s NTT DoCoMo owns a 26 percent stake, also operates on CDMA and monthly additions are reported separately.

DoT appoints independent auditors to examine 4 telcos’ books

Business Daily from THE HINDU group of publications, Wednesday, May 13, 2009

New Delhi, May 12 The Department of Telecommunications has appointed independent auditors to look into the accounts of Bharti Airtel, Idea Cellular, Vodafone Essar and Tata Teleservices to check whether they had paid lower licence fees to the Government. One of the auditors being proposed by the DoT is Contractor Nayak & Kishnadwala.

The move follows recommendations made by the Telecom Regulatory Authority of India asking the DoT to examine Airtel’s revenue reporting in the long-distance telephony segment.

The regulator had noted that there was a shift in Bharti’s revenues to the long-distance segment, which attracts only 6 per cent licence fee as against a maximum of 10 per cent in the case of mobile services.

The auditor has been asked to examine whether the company has for 2007-08 and 2006-07 correctly presented the revenue data in their quarterly and annual statements and whether the company has paid various charges due to the government.

“TRAI has raised a doubt that the company (Bharti Airtel) is shifting the revenue of mobile segment to long-distance segment. To clear the doubt raised by TRAI, it is suggested that we get conducted the special audit of the licencee company,” said an internal DoT note. Similar audit is already under way on Reliance Communications’ accounts.

Large integrated players are increasingly using differential licence fee to pay lower revenue share to the Government. In the current licence fee regime, telecom companies are required to pay only 6 per cent of the annual revenues from long-distance services compared to an average levy of 10 per cent, including spectrum charges, for mobile services.

These companies are saving on the net outgo to the Government by loading higher revenue component to the licence with lower revenue share.

The regulator had suggested that integrated telecom players, which offer a whole range of services, should be asked to submit the break-up of income from their various stand alone subsidiaries to determine the revenue share payable to the Government.

The regulator has proposed that the DoT should carry out special audits of the operator’s account books every 3-5 years.

Users connect better with prepaid

11 Feb, 2009, 1730 hrs IST,TNN

NEW DELHI: Call it the death of post-paid mobile connection in the world’s fastest-growing mobile market. India has all but completely rejected the post-paid option, with nearly 99% of all new mobile user additions in the country accounted for by prepaid connections.

With mobile operators increasingly doling out cut-price offers for newer, often poorer users, customers are also embracing this platform with gusto.

Consider this: Bharti Airtel, India’s largest mobile company by users, added a record 8.1 million-plus customers during the October-December 2008 quarter, of which 99.6% were prepaid users. Ditto for Reliance Communications, Vodafone Essar and Tata Teleservices. About 99.9% of RCOM’s 5.5 additions during the quarter went in for a prepaid connection while for Vodafone Essar and Tata Teleservices, the numbers were 97.3% and 96%, respectively. “Fundamentally, the Indian consumer prefers prepaid as it empowers them. The customer wants to control how and when to spend and sees real value on a call-by-call basis in prepaid,” said Bharti Airtel chief marketing officer Sanjay Gupta.

The switch towards prepaid from postpaid or contract connections has been steadily climbing. From accounting for about 60% of the country’s total subscriber base in 2005, prepaid users now constitute over 92% of India’s 360 million mobile customer base. Bharti’s numbers for October-December 2007 quarter show that a little over 95% of additions then preferred prepaid connections.