India will de-link second-generation radio (2G) spectrum that now comes free with telecoms licences and ask companies to pay for spectrum based on a market-driven mechanism, the telecoms minister said, unveiling the broad contours of a new telecoms policy.
Kapil Sibal also told reporters bigger telecoms carriers such as Bharti Airtel and Vodafone's India unit will be asked to pay market-linked prices for 2G radio-spectrum beyond 6.2 mega hertz. Such a pricing mechanism is yet to be finalised.
The government's move is seen as a bid to make the world's second-largest and fastest-growing market for mobile phone services more transparent. The sector was hit by controversy over the awarding of licences and spectrum in 2007-08, sparking a political row in Asia's third-largest economy, with the opposition attacking the government for failing to fight graft.
A state auditor's report that India lost $39 billion in revenue due to irregularities in the grant of licences led to the resignation of then Telecoms Minister Andimuthu Raja. Sibal, who took over in November after his predecessor quit, has said the government will announce a new telecoms policy this year, overhauling decade-old telecoms rules.
Under the present rules, mobile operators pay a total 16.58 billion rupees ($362 million) for licences in all of India's 22 zones and get 4.4 mega hertz of initial spectrum bundled with the licences without having to pay any additional price for it.
"We think there needs to be a directional shift away from the old policy... We are going to delink the licence from the spectrum in the new dispensation," Sibal told reporters on Saturday. "Henceforth, spectrum will be awarded, apart from delinking, on a market-based pricing mechanism," he said, adding the price of spectrum would be determined either by auction or through some other process depending on the regulator's proposals.
India last year sold third-generation (3G) mobile radio spectrum to firms in an auction that saw companies paying nearly $15 billion to the government, and the state auditor has criticised the government for awarding 2G spectrum for free. Companies that were given telecoms licences and 2G spectrum in 2008 in turn sold stakes in the ventures to international telecoms firms including Telenor and Etisalat at several times the price they paid for acquiring licences.
The government has asked five companies - including the Indian ventures of Telenor and Etisalat - to defend 85 licences granted in 2008 after the state auditor said the firms were not eligible for the licences they were given.
The companies are expected to reply to the government notices by mid-February after which the telecoms ministry will decide whether to cancel the licences.
Sibal said that if the licences are held to be valid, the companies will have to pay for any additional spectrum beyond the 4.4 mega hertz spectrum already given to them. Older operators such as Bharti and Vodafone Essar, who have been in the market for a long time and have received additional 2G radio spectrum as their subscriber base increased, will also be asked pay for spectrum beyond 6.2 mega hertz, the upper limit in their licence agreements. "Anybody who has beyond 6.2, will have to pay market price, even existing licence holders," Sibal said.
The state auditor had named eight companies including Bharti, Vodafone Essar, Idea Cellular that were given spectrum beyond 6.2 mega hertz without having to pay for it. Separately, the sector regulator Telecom Regulatory Authority of India last year recommended that firms pay a one-time fee for 2G spectrum beyond 6.2 mega hertz based on 3G prices, a proposal that drew protests from the older operators.
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