The document discusses the impact of license cancellations in India's telecom sector and the One Nation Roaming Policy. Regarding license cancellations, it notes increased tariffs for customers, revenue losses for affected operators, and decreased investments across the sector. The One Nation Roaming Policy aims to abolish roaming charges and increase rural access, but may also cause revenue losses for operators and increased overall tariffs.

1. License Cancellation Impact on the Wholesale Voice Market
Shubham Jaiswal

2. Index
 License Cancellation Impact on the Wholesale Voice Market
 Spectrum Allocation in India
 Impact on Customers
 Impact on Operators
 Impact on Telecom Sector
 One Nation Roaming Policy
 Positive Impacts
 Negative Impacts
 Summary

3. Spectrum Allocation in India
 The country is divided into 22 telecom zones , called circles (roughly along state
boundaries), with a total of 281 zonal licenses in the market.
 The Department of Telecom has been formulating developmental policies for the
accelerated growth of the telecommunication services. The Department is also
responsible for grant of licenses for telecom sector in India.
 In India GSM technology works in the frequency bands of 900 and 1800 MHz and
CDMA technology works in the 800 MHz band. Presently, 100 MHz spectrum is ear
marked for GSM services and 20 MHz is earmarked for CDMA. 65 MHz of the GSM
band is still with Defence forces. The minimum amount of spectrum required for
launching GSM services is 4.4 MHz.
 In 2008, 122 Unified Access Service (UAS) and new second generation (2G) licenses
were issued to telecommunication services providers on the basis of first come first
serve and at the rate of 2001.

4. Impact on Customers
Subscriber Base of affected telecom players as Dec.2011
% of
No. of Total Circles with
Impacted Total
Players Technology License Subs. less than
Subs (Mn.) Subs.
Cancelled (Mn.) 1,000 Subs
Impacted
Idea/Spice GSM 13 6.7 106.4 6.30% 0
Uninor GSM 22 36.3 36.3 100% 9
S. Tel GSM 6 3.5 3.5 100% 1
Videocon
Telecom. GSM 21 5.4 5.4 100% 3
Loop GSM 21 0 3.2 0.20% 20
Etisal at DB GSM 15 1.7 1.7 100% 0
Sistema Shyam CDMA 21 12.7 15 84.30% 6
Tata CDMA 3 0.3 83.5 0.40% 0
Total 122 66.6 255.1 26.10% 39
All India 334 66.6 893.8 7.50% 107 Market Size: 969 Million
Source: TRAI and CARE
 Small Customer Base: Around 7.5% customers have to switch to other operators through mobile
number portability(MNP)
 Underutilized Circles: Out of the total 122 cancelled licenses, 39 license areas were highly under-
utilized as licenses had less than 1,000 subscribers in registered to these licenses of December 2011,
implying the services were not fully rolled out.
 Higher Tariff: The Telecom Regulatory Authority of India had recommended Rs. 18,348 crore as the
reserve price for 4.4 MHz of spectrum — a quantum jump from Rs. 1,658 crore. The industry has
forecasted that this high reserve price will lead to a tariff hike of roughly 30 paise-Re. 1/minute,
depending on the circle and amount of spectrum auctioned.

5. Impact on Operators
Revenue of affected players -FY 2011
Affected Revenue Total Company Revenue Revenue Impact
FY2011 (Rs,mn) FY2011 (Rs,mn) as % of total
Telecom Opetaror
Idea/Spice 2,131 116,282 1.80%
S-Tel 522 522 100%
Uninor 5,311 5,311 100%
Video
Telecommunications 228 228 100%
Etisalat DB 49 49 100%
All India 8,242 1,216,141 0.70%
Source: TRAI and CARE
 Foreign Investors: Foreign players that entered into joint ventures to get a bite of one of the
biggest telecom market in world are now feeling the pinch. This will temporarily impact the FDI flow in
the sector as the existing players and new foreign players may not participate in fresh auctions.
 Gains for Incumbent Players: Bharti Airtel, Vodafone and Reliance Communications will be the likely
gainers due to this verdict, as their licenses have not been cancelled. Besides, these companies, will also
gain due to number portability exercise of the customers of the indicted companies. Additionally, the
lost licenses will help the sector partially offset the competitive pressure, helping the big players.
 Legal Battles: Some of the foreign companies have threatened to drag the government to international
arbitration for losing not only their money but being asked to pay penalty for corrupt practices for
which their domestic partners have been held guilty.

6. Impact on Telecom Sector
 Reduced Investments: The expansion is on a standstill
due to uncertainty created by 2G license cancellation,
lack of clarity of National Telecom Policy and spectrum
re-farming.
 Substantial investment was planned by some of the
affected players like Idea(Rs.12 billion), Sistema
Shyam(Rs.275 billion) and S.Tel(Rs.20 billion), to roll
out their networks, in the next 2-3 years, which will get
delayed or cancelled.
 Slowdown in Tower Industry: The tower industry
compounded an annual growth rate of 30 per cent for
the period between FY 2006 and 2011. In comparison,
only 2 percent growth has been pegged between
2010-11 and 2011-12.
 Raising Capital: Banks have an exposure of over Rs
10,000 crore to the telecom companies which were
granted 2G license in 2008.
 The Reserve Bank of India (RBI) is set to ask banks to
treat the Rs 2,100 crore they lent to the now-defunct
telco, Etisalat-DB Telecom, as a non-performing asset
as the nature of collateral Telco’s had given to bank for
loansnearly 75 percent were against licenses, which
were cancelled. Total Value:2100 Crore

7. One Nation Roaming Policy

8. Positive Impacts:
 Abolish Roaming Charges: The New Telecom Policy
recommends ‘one Nation one license’ policy across
services and service areas to abolish Roaming charges.
The distinction between local and STD calls would
vanish.
 Number Portability: The government abolished zonal
roaming fees and will allow users to retain their
numbers even if they move from one zone to another,
under the new policy.
 Single License: With the implementation of new
National Telecom Policy, now Telecom
operators/Mobile Service providers would not require
any separate licenses for operations in various parts of
the country and a single license would suffice.
 Informed Consumer: The new policy would protect Level of Impact
consumer interest by promoting informed consent,
transparency and accountability in quality of service, Parameter 0-1 year 1-3 years 3-5 years
tariff, usage etc. Abolish Roaming
Charges Medium low low
 Convergence of Services: Convergence of services will
cover voice, data, video, Internet, VAS Number Portability High High High
 Rural Penetration: National Telecom Policy 2012 Single License Medium low low
envisages the reach of telecom services in rural areas to
Rural Penetration low Medium Medium
increase to 70 per cent by 2017 and 100 per cent by
2020 from around 39 per cent now.

9. Negative Impacts:
 Revenue Losses: For an industry battling widening
costs and shrinking margins, it means foregoing
valuable revenue. Larger operators will face a
bigger impact but small operators will have less
impact on their revenues due to the small
subscriber base.
 Increased Overall Tariff: Operators may
compensate their losses by raising local call and
SMS charges.
 Small Roaming Subscribers : The national
roaming will only impact a small sliver of
subscribers. Only 10 per cent of total subscribers
actually roam.
 License Cost: Changing a circle-wise license regime
into a national regime threatens to substantially Level of Impact
reduce new competition, as the cost of a nation-
Parameter 0-1 year 1-3 years 3-5 years
wide license will be higher than circle-wise license.
 Spectrum De-linked from License: Spectrum will Revenue Losses: High Medium low
be de-linked completely from License. From now Increased Overall Tariff low low No Impact
onwards, telecom companies will have to shell out
License Cost High Medium Medium
extra money to get spectrum. Till now , they use to
get 5 MHz bundled with license. Spectrum De-linked Medium low low

10. Summary
 Increase in Tariff: Overall increase in tariff due to higher spectrum price, reduced
competition and revenue losses due to one nation roaming in the telecommunication
sector.
 Decreased Investments: Uncertainty in the telecom sector has lowered lenders and
overall business sentiments in country, shattering India’s image as an attractive
investment destination.
 Effect on Tower Industry: Tower industry will look for alternative markets as the
investments have stalled in the telecom sector, due to which their growth has been
reduced.
 Difficulty in Raising Capital: Banks will be unwilling to lend to telecom operators as the
current scenario of the telecom sector is gloomy.
 Transparency and Rural Penetration: One Nation Roaming Policy will create greater
transparency and help in greater penetration of telecom sector in rural areas.