Vodafone retorts to spectrum hoarding charges

A battle between incumbent GSM and CDMA operators has broken out, with Marten Pieters, the managing director of Vodafone Essar, the country's second-largest telecom operator, lashing out at comments made by a competing operator, saying it was ridiculous to imply that incumbent GSM players like them were hoarding scarce spectrum.

Tata group Chairman Ratan Tata said in a televised interview that important players were "hoarding spectrum" for free. Pieters also raised questions about CDMA players' record on utilisation of scarce spectrum. Tata Teleservices is a CDMA player.

However, the Tatas got an immediate endorsement from Reliance Communications (RCom), another CDMA player.

In a statement, RCom said they supported Tatas' charges on spectrum hoarding by old GSM operators. Tatas and RCom also got permission to operate GSM services under the dual technology policy.

In a strongly worded statement, Pieters said: "There have been some reports in the media quoting certain operators on 'spectrum hoarding' and it is ridiculous to imply that the incumbent GSM players are hoarding spectrum."

On utilisation of the spectrum by CDMA players, he said: "Given that the CDMA spectrum has the capacity to serve at least four-five times more subscribers than GSM (as has also been averred by the CDMA operators on affidavit), it is the CDMA operators who are under-utilising spectrum, as they are using it at levels far below the efficiency of the GSM players.

Further, now with the allocation of a second stream of GSM spectrum, the spectrum utilisation efficiency of these dual technology players has dropped even further."

However, RCom challenged his statement and said old GSM operators took 2G spectrum totally free as recently as May 2008 to March 2009.

Old GSM operators did not even pay for excess spectrum at old rates. "RCom and Tatas have consistently raised this issue with the Department of Telecommunications," it added.

According to Pieters, under the government's spectrum policy, a licencee initially gets 4.4 megahertz of spectrum. After that, an operator is given additional spectrum, as subscribers in the network increase. This additional 2G spectrum is given at no excess cost to the operator.

"The rationale for this policy is to achieve better utilisation of spectrum by allocating it to those who need the spectrum more, due to higher subscriber base.

The licences, too, provide for allocation of additional spectrum based on usage, justification and availability and as per the norms and guidelines laid down by the government from time to time," said Pieters.

Tata had long since expressed the view that subscriber-linked spectrum allocation was not the correct method to allot spectrum, and that the companies which held extra spectrum should pay for it. He had said that CDMA players were being discriminated in spectrum allocation.

The debate has become more controversial, with the Telecom Regulatory Authority of India's report, saying that 2G spectrum could be priced at the same level as that of 3G spectrum.

The telecom regulator's view has formed the basis of the Comptroller and Auditor General of India's report, which contended that the government lost over Rs 1,70,000 crore (Rs 1,700 billion) as a result of giving spectrum at a cheap price.

If spectrum given to incumbents during 2004 to 2007 is also included, the overall loss could go over Rs 2,00,000 crore (Rs 2,000 billion).