With the third generation (3G) game over, for now, telecom operators are staring at the possibility of having to pay Rs 1,03,000 crore (Rs 1.03 trillion) to the government when their 2G airwave licences come up for renewal, beginning 2014.
Eleven telcos, whose licences will expire between 2014 and 2021, will have to pay this 13-figure sum if the government accepts the telecom regulator's proposal of pricing second generation radio airwaves on the basis of prices determined at the just-concluded auction of third generation spectrum.
The Telecom Regulatory Authority of India has proposed that 2G licences be henceforth given for 10 years, but for that, companies will have to pay the market rate for spectrum.
Trai has calculated this figure on the basis of the 3G spectrum price as on May 17 and an additional 3 per cent compounded interest for every year from now until the date of renewal of the licence, to determine the market rate for spectrum.
However, there is a silver lining for operators, according to Trai. The regulator says telecom companies will save more than Rs 48,000 crore (Rs 480 billion) over 20 years, as it has recommended that the percentage of revenue share with the government be reduced from the current average of 8.22 per cent to 6 per cent across the country.
The projected savings, adds Trai, do not take into account the annual increase in revenues for the operators, in which case it would be much higher.
Trai says the industry will save Rs 2,400 crore (Rs 24 billion) per annum even if its net revenue remains static at the current figure of Rs 120,000 crore (Rs 1.20 trillion).
But, telecom operators are hoping the views of Union communications minister A Raja and the Department of Telecom prevail with the government. Raja has said 2G should not be equated with 3G. His view has been echoed by DoT, which has said that 3G being three times more efficient than 2G, there could be no parity in their prices.
If the government accepts these views, the total payout for renewal of licences will come down by a third to Rs 34,000 crore (Rs 340 billion).
That explains why telecom operators, especially the GSM lobby, attacked the regulator for bundling the price of 2G with that of 3G auction. Leading telcos have alleged that 3G prices were kept artificially high because of the limited spectrum that came up for auctioning, leading to a bidding war.
According to Trai calculations, Reliance Communications has to fork out the most for GSM and CDMA renewal, which totals Rs 20,729 crore (Rs 207.29 billion), followed closely by Bharti, which will have to pay over Rs 20,689 crore (Rs 206.89 billion) from 2014 to 2021 for renewal of its 2G licence. Vodafone will have to pay Rs 18,087 crore (Rs 180.87 billion), Tata Teleservices Rs 12,850 crore (Rs 128.50 billion) (for GSM and CDMA), and MTNL Rs 12,825 crore (Rs 128.25 billion).
These numbers are a far cry from the Rs 1,650 crore (Rs 16.50 billion) that operators paid for a pan-India licence, or double of what Reliance and Tata paid for a dual technology licence. But, nearly half of the money will come to the government in 2021 when most of the licences come for renewal.
However, if the operators can push through a formula in which the 2G price will be determined at one-third that of 3G, each operator will have to pay only Rs 3,090 crore (Rs 30.90 billion).
