 The Empowered Group of Ministers (EGoM) has decided to allow telecom operators to retain 2.5 MHz through an administrative allotment in the 900 MHz band paying a market-determined price.
The EGoM, headed by Finance Minister P. Chidambaram, decided that those telecom companies having 5 Mhz spectrum will need to vacate space.
According to senior Department of Telecom (DoT) officials, the operators would be given an option to surrender the entire spectrum if they do not want to pay the market-determined price.
This price will be determined at the time of the auction in the 900 MHz band spectrum, which is likely to be held somewhere in June 2013
Reacting to the partial refarming decision, the Cellular Operators Association of India (COAI) said it will be difficult to service almost 500 million subscribers in the existing 900 MHz band with the same quality of service with limited 2.5 MHz in 900 MHz band.
The COAI also said that an operator with 2.5 MHz in 900 MHz band and remaining spectrum in 1800 MHz band is worse off than an operator with complete network in 1800 MHz band as this network will give a false delusion of coverage.
According to consultancy PwC India, the partial spectrum refarming could have a detrimental impact on consumers through higher prices as well as poorer quality of service.
“It will also not provide the financing relief the industry desperately needs to be able to reduce industry debt to EBITDA margin ratios,” said Mohammad Chowdhury, Leader Telecom, PwC India.
The telecom commission had last month recommended that the operators give up all their spectrum in the 900 MHz band at the time of their licence renewal starting November 2014.
The move was highly criticised by the industry.
A study on the spectrum refarming conducted by consultancy firm Analysys Mason had pointed out that operators with 900 MHz band will need to replace 286,590 base stations and install an additional 171,954 base stations to provide equivalent coverage on 1800MHz.
The industry was apprehensive about the decision saying this would cost them over Rs.1,00,000 crore in replacement of base stations and deployment of additional sites and other related charges.
Refarming will lead to operators such as Bharti Airtel, Vodafone and Idea Cellular to surrender their spectrum in the 900 MHz band when their permits comes up for renewal starting November 2014.