India is keen to hasten mobile services in "innumerable uncovered villages" on security grounds since many are in far flung, inhospitable zones near the Chinese and Bangladesh borders. But in the run-up to inviting bids from mobile phone companies, a telecom department panel has suggested modification in the tendering norms to ensure future cost escalations triggered by the spectrum refarming policy are shouldered by the telecom operators.
India's decision to refarm spectrum mandates incumbent GSM operators to relinquish their efficient spectrum in the 900MHz band during upcoming licence renewals starting late 2014 and buy them back through auctions, or shift to another band of airwaves.
Since many uncovered villages are in circles where mobile operators will have to repurchase spectrum in future auctions once their licences expire over the next three years, equipment costs will surge if a GSM operator, currently offering service in a region on the 900MHz band, is compelled to buy airwaves in the less efficient 1800MHz band, and launch services in uncovered villages within the circle.
"A suitable condition may have to be incorporated in the (forthcoming) tender, which should indicate the cost of change of equipment/spectrum, if any, will have to be borne by the telecom service provider, especially since many non-metro licences will come up for renewal in 2015, 2016 and 2017," a telecom department (DoT) panel says in the note.
The panel has reduced the cost of the project of extending mobile coverage to these uncovered regions to 3,800 crore from the original 4,900 crore as it now plans to first cover 42,311 villages on priority, compared to the initial 56,397 villages. Also, its capex estimates are based on delivery of mobile services on the efficient 900MHz band.
The entire project is likely to span at least three years and is proposed to be financed by Universal Services Obligation Fund (USOF), but the DoT wants that cost escalations induced by the refarming policy would have to be borne by the operators. The USOF is a DoT wing that subsidizes rural network infrastructure rollouts.
Telcos have been opposing the DoT's refarming proposal since it would entail a total overhaul of networks. The move will also take away majority of the airwaves in the efficient 900MHz band from operators and possibly replace them with inferior frequencies in the 1800MHz band.
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