India Wrap: Tensions & Tribunals

As usual there’s a lot going on in India’s telecom industry, so here are the highlights to close out a week when the Department of Telecom seems to have upset everyone from the nation's regulator, to Spice Telecom to BlackBerry .

  • Tensions are brewing again between the Telecom Regulatory Authority of India (TRAI) and the government’s Department of Telecom (DOT) over continued policy disagreements. The latest bone of contention is the country’s long-awaited 3G policy, for which the DOT favors an open auction while the TRAI does not. (See India on Edge Over 3G.)

    The DOT is mulling the idea of creating a new form of 3G license that would allow new operators into the market and bypass the system for 2G, where operators are waiting in line for spectrum.

    According to reports in the Hindu Business Line and Economic Times, Nripendra Misra, chairman of TRAI and a former secretary of the Department of Telecom himself, has fired off a letter helpfully reminding the DOT that it’s legally required to take the regulator’s recommendations into account before making any changes to the terms of the unified access service license (UASL) for operators. (See A Guide to India's Telecom Operators.)

    Attached to the letter was a copy of the TRAI’s recommendation that new operators –- including foreign companies –- not be allowed to bid for 3G spectrum, since existing operators have invested heavily in infrastructure and would be able to roll out services more quickly.

    It’s not the first time to the two offices have been at loggerheads; disagreements have reared up before over everything from number portability to spectrum allocation.

  • M&A talks are ongoing between Reliance Communications Ltd. (RCom) and South Africa-based Mobile Telephone Networks (MTN) , with the latest incarnation of the potential deal involving a cash and stock swap that would see MTN taking a 74 percent stake in Reliance –- the maximum foreign ownership allowed under Indian law –- with Reliance chairman Anil Ambani becoming the group’s largest shareholder.

    The companies are in exclusive talks for up to 45 days, following the breakdown of a deal between MTN and Reliance’s domestic rival Bharti Airtel Ltd. (Mumbai: BHARTIARTL). MTN, which operates in 21 countries throughout Africa and the Middle East, could still attract other suitors. (See MTN M&A Latest, MTN Becomes M&A Magnet, and Etisalat Ups Africa Investment.)

    It’s worth noting that any M&A deal involving MTN could encounter problems receiving financing from U.S. and European banks because its operations include mobile networks in Iran, Sudan, Syria, and Liberia –- countries that are under political sanctions.

    Those four countries accounted for 22 percent of MTN’s 68 million subscribers at the end of March, and Iran in particular is one of its fastest growing markets –- its MTN Irancell subsidiary added 3.02 million new subscribers during the first quarter alone.

    The proposed share swap would avoid any cash transaction that would rope in financing from international banks.

  • Russian conglomerate Sistema has increased its stake in regional operator Sistema JSFC (London: SSA), exercising a call option that takes its holding from 51 percent to 72 percent. (See Sistema Buys More Shyam.)

    Sistema is investing big in India, taking the operator from the single region of Rajasthan to the rest of India where it has been awarded licenses. Shyam recently received CDMA spectrum for the Maharashtra and Kerala circles, or services areas, so that it now has frequencies for 15 of India’s 23 circles. (See Sistema Adds Spectrum.)

    In a recent conference call accompanying its fourth quarter and full year results for 2007, then-CEO Alexander Goncharuk said Sistema has a capex budget of $1 billion this year for India, a sum that includes the increased stake in Shyam and the cost of licenses. (See Sistema Appoints CEO and MTS Names New CEO.)

    The company is apparently edging out Shyam’s management for the enlarged operator, as Anton Abugov, VP of strategy and development, told analysts on the call: "We're not looking at the existing Shyam Telelink management as the core management for our pan-Indian expansion... Therefore we have strengthened the company with professionals from the Holding level, from our level, and bringing external professionals as well on board."

  • Shyam isn’t the only operator that has been receiving new spectrum. Companies such as real estate firm Unitech and regional operator Spice Telecom confirmed to the Bombay Stock Exchange this week that they've been given GSM spectrum in the Andhra Pradesh region, making it now five circles where frequency has been doled out –- Tamil and Nadu and Chennai, Orissa, Kerala, and now Andhra Pradesh. (See India Begins Allocating GSM Spectrum and India Begins Allocating GSM Spectrum .)

  • Spice Telecom had taken the issue of spectrum allocation to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), requesting that it stop the Department of Telecom from allocating more spectrum while it challenges the DOT’s decision to award it four more licenses rather than the 20 it requested. Spice didn’t qualify to become a nationwide player on the grounds that its valuation failed to meet the DOT’s threshold.

    The TDSAT ruled Wednesday that although Spice will likely lose out, it's in the "larger public interest" for the other operators to receive spectrum and begin rolling out their new networks.

  • Research In Motion held another meeting with the Department of Telecom Thursday to try to allay the government’s concerns about the security of emails sent between its devices, without resolution.

    India’s security agencies claim the BlackBerry poses a security threat because emails sent from the device can't be traced or intercepted. The government has requested RIM to either hand over a message encryption key, which the company says it doesn’t have, or set up host servers in India so it can monitor messaging traffic.

    RIM has 114,000 BlackBerry users in India on four networks -- BPL Mobile , Vodafone India , Reliance Communications, and Bharti Airtel.

    — Nicole Willing, Reporter, Light Reading

  • lrmobile_kumaramitabh 12/5/2012 | 3:39:44 PM
    re: India Wrap: Tensions & Tribunals The news that the issue of whether foreign companies or even Indian companies not having a Mobile license can bid for a 3G license having been refered to the Group pf Ministers is a sad commentary of what is happening in this field.

    WiMAX and 3G are unfortunately linked for the spectrum consultations, though it need not have been the case. The last time the 3G issue was refered to the GOM was in 2005. So after 3 years we are back to the point of a political consensus on this issue, which should normally have been a no brainer. More competitition is always good, it does not help to restricg 3G to only existing players at all.

    It is also a travesty to link the 3G with the WiMAX. This means that the 2.3-2.4 Ghz and 2.5-2.69 GHz bands, which are the prime bands for mobile WiMAX will also not be auctioned for the time being.

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