1. Uncertainty may see telcos exiting 3g pacts over time

Uncertainty may see telcos exiting 3g pacts over time

Companies have sensed the government’s intention of not allowing such pacts. The Centre has already stated that it will auction 15 MHz in the 2,100 MHz band after it is freed up by the Armed Forces.

By: | New Delhi | Updated: March 28, 2015 1:25 AM

Leading telcos Bharti, Vodafone and Idea, which have 3G roaming pacts, may exit such arrangements over time as they develop new networks in circles where they do not have 3G currently.

For instance, Bharti has purchased incremental 900 MHz and 2,100 MHz, which will enable it to offer 3G across markets with the exception of the Kerala circle, which contributes a meagre 1.9% to revenue.

According to a CIMB report, Bharti may roll out its own 3G network and move out of 3G ICR arrangements in due course. “Bharti is positioned to offer 3G in 900 MHz in key circles, which would be a competitive advantage over the medium term to capture more data revenue market share.

graph4Similarly, Idea has successfully renewed its 900 MHz spectrum across nine circles. In addition, it was able to acquire a higher amount of 900 MHz waves in its key circle (Maharashtra), which will enable the company to offer 3G in 900 MHz and garner more market share.

Vodafone India, too, has successfully renewed its 900 MHz spectrum across six circles. It has also captured an additional 900 Mhz in two circles, West Bengal and Odisha. Vodafone purchased 2,100MHz spectrum in six additional circles.

“The incremental 900 Mhz and 2100 MHz investment will enable the company to offer 3G across all markets, with the exception of six circles (Andhra Pradesh, Punjab, MP, HP, Bihar and J&K) which contributed only 10% to Vodafone’s India revenue,” industry analysts said.

Sources said that due to the uncertainty over 3G intra-circle roaming pacts, which the government has repeatedly called illegal, such arrangements would not last long.

This has cast a shadow on the future of such arrangements as the government has moved the apex court even as the telecom disputes tribunal, TDSAT, had overturned the Department of Telecommunications’ (DoT) ban on such pacts, calling them legal.

“Telcos will rather prefer to have 3G spectrum of their own than continue with 3G ICR pacts. The uncertainty over 3G roaming pacts will drive telcos to go in for aggressive bidding to grab 3G waves wherever they have a sharing agreement with other telcos,” said a government official.

A senior industry executive told FE that such ICR pacts were very expensive in the long run and added to overhead costs, such as termination charges, which is not a sustainable business model in the long run.

“Also, as a national player in telecom sector, we would like to have 3G waves in all the 22 telecom circles. The 3G ICR pact was fine for a year or two. But not any more,” said another senior industry official.

Another official told FE that 3G roaming agreements were under the scanner of the Supreme Court and the telcos can’t take any chances. Hence, they have gone all out to ensure that they have additional airwaves for 3G networks wherever they have a roaming agreement.

The government had moved the Supreme Court challenging the legality of 3G roaming pacts, which allow carriers to offer services in circles where they don’t possess 3G bandwidth.

Telcos with such pacts usually gain — this means additional 3G subscribers, even in areas where they do not hold 3G spectrum. This, in turn, means higher 3G revenues for a company.

Industry sources said that companies have sensed the government’s intention that it will not allow such pacts. The government has already stated that it will auction 15 MHz of 2,100 MHz band after it is freed up by the Armed Forces.

Tags: Vodafone
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