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In SOS to Trai, Vodafone seeks hands-off 3G line
Vodafone has warned against redistributing wireless spectrum that has already been allocated to mobile phone firms, as the debate
over the overhaul of the rules for the telecom sector gets polarised between established incumbents and aggressive younger rivals.

The world’s largest mobile phone firm has told telecom regulator Trai that such a move will set a precedent for “forcible appropriation and redistribution of spectrum” and that “a more certain way to destroy all incentives for investment and innovation could not possibly be found”.

As Trai readies to rewrite the rules governing the telecom sector, older, well-established operators such as Bharti Airtel and Vodafone are trying to preserve the spectrum that they have already got while new entrants like Reliance Communication and Unitech Wireless try to whittle down their first-mover advantage.

RCOM started delivering services based on the GSM platform only last year, while Unitech Wireless is poised to launch by the year end.

The changes planned by Trai include new regulations that will allow mobile phone firms to buy each other out and trade in spectrum. Its recommendations will be ready by December 2009 and a new policy can be put in place only before the end of the fiscal year in March 2010.

The lobbying by phone firms is also happening in the backdrop of a bruising price war that has cut into the revenues and profits of all operators as well as the auction next month of 3G spectrum for high-speed data services.

Thirteen mobile phone firms are jostling for space in the Indian mobile market and four more companies are due to launch services by next year, portending fiercer battles to win and keep customers. India currently has some 500 million wireless subscribers.

“Any policy which seeks to re-engineer the entire industry in order to attempt to sustain more than double the number of operators that have proved sustainable in any other market would not only be unprecedented and destructive for customers and the country, but ultimately futile,” Vodafone wrote.

With over 85 million customers, it is the second-largest GSM operator in the country behind Bharti Airtel.

Bharti has told Trai that it “strongly supports” the recommendation of a government panel that any 2G spectrum beyond 4.4 MHz for existing licence-holders should be auctioned and not linked to the number of subscribers. So far, 2G licences have come with start-up spectrum of 4.4 MHz and additional airwaves are given based on the number of subscribers.

RCOM, on the other hand, has demanded that the amount of spectrum a phone firm gets should be limited to 6.2 Mhz, taking aim at those such as Bharti that hold radio frequencies beyond the 6.2 MHz level in many circles.

It has asked Trai to immediately take back all 2G frequencies allotted to GSM players beyond 6.2 MHz and levy a one-time charge for past use. It claims that spectrum over this level is required only by those telcos that are “hoarding” this resource or using older and inefficient technologies.

Unitech Wireless, majority-owned by Telenor, wants all the spectrum held by incumbents to be auctioned when their licences come up for renewal.

Vodafone, which counts Telenor as one of its main rivals in Europe, accused the Norwegian company of employing “double standards”. Telenor, it said, had campaigned against redistribution of 2G spectrum in Sweden.

“In contrast, presumably because it suits Unitech’s commercial interests in India, the opposite has been proposed,” it wrote.

Vodafone, which started out as Hutchison Max in the early 1990s, argued that regulators in developed countries assist new entrants only when there was insufficient competition, but this approach cannot be adopted for India, the world’s most competitive market.

It also countered the demand Tata Teleservices, which launched GSM services recently under the Tata DoCoMo brand, as well as RCOM, to limit airwave allocations to 6.2 Mhz saying all frequencies exceeding this level have been given in line with licence terms and contracts.

“Any attempt which seeks to undo those decisions, appropriate the spectrum lawfully granted, and redistribute it to other operators could undermine policy certainty and investor confidence. The implications would be profound. If the policy approach were to be as some stakeholders are suggesting, it would be difficult if not impossible, for example, for bidders to participate in the 3G auction with any certainty.”

The UK-headquartered telco has also asked Trai to focus on “clearing more spectrum for distribution to the industry through open auctions, aligning M&A rules with international practice to recognise that no more than five national operators are likely to be sustainable in the long run, and introducing spectrum trading in order to allow market forces to determine optimal spectrum allocations and market prices for spectrum.”

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