BSNL may seek Rs 2,000 crore grant to give up a part of spectrum

KOLKATA: State-run Bharat Sanchar Nigam Ltd (BSNL) is considering seeking government grant in return for relinquishing a slice of the premium 900MHz spectrum which the telecom regulator wants to free up for the next round of airwave auctions.
A top BSNL executive told ET that the company is likely to seek a “near Rs 2,000-crore grant from the government to meet additional capex and network re-engineering costs” as a pre-condition to heeding the regulator’s call and relinquishing 1.2MHz of efficient 900MHz spectrum in some 18 circles (barring Punjab) where its licences expire in 2015-16.
“It’s technically possible to provide mobile coverage with five units of 900MHz spectrum instead of our current 6.2MHz allocation in each circle. But that would require BSNL to install at least 15,000-odd additional base stations across India and also entail additional investments in core networks to maintain coverage quality with reduced spectrum holdings,” the executive said.
The Telecom Regulatory Authority of India (Trai) has suggested taking back a portion BSNL’s 900 MHz airwaves to boost spectrum supply before conducting a sale and pre empt over-bidding. It has also proposed assigning 1.2 MHz of air waves to the company in the less efficient 1,800 MHz band in Gujarat, West Bengal and Rajasthan circles where BSNL's spectrum holdings are below 3.8 MHz.
In its recent spectrum pricing recommendations, Trai said BSNL's ability to offer mobile broadband services would not be hurt even if it is left with 5MHz in the 900MHz band once it converts such spectrum holdings into “lib eralised form”.
Another BSNL board member said the telco would dismiss Trai’s suggestion if the government is not a position to fully compensate BSNL for meeting additional capex and network re-engineering costs.
A senior official of the Department of Telecommunication (DoT) said the government would shortly “seek BSNL’s views”, like it did when Trai earlier this year called on the telco to return 50% of its CDMA spectrum in the 800 MHz band.
“We can’t simply take away a slice of BSNL’s most efficient spectrum without eliciting its views on whether such a move would hurt their pan India mobile operations and reduce long-term competitiveness vis-a-vis private operators, especially at a time when the government is exploring ways to strengthen the loss-making telco,” the DoT official said.
Analysts feel Trai’s recommendation is justified as it would free up extra 900MHz spectrum that can be productively used for 3G services, but remain skeptical on DoT playing ball.
“Trai’s recommendation (if accepted by DoT) will doubtlessly create an additional 5MHz contiguous block in the 900MHz band and will be very positive for telcos, but we aren’t building in a benefit to incumbents, considering that similar past attempts by Trai haven’t fructified,” said Phillip Capital in a recent note to clients. Brokerage Credit Suisse said, “Taking back 1.2 units in the 90 MHz band from BSNL and adding it to the auctioned spectrum is a positive recommendation but is unlikely to be implemented so soon.”