Vodafone India has said a shift in the airwaves frequencies alloted to it to a higher band will put an additional cost burden of around Rs. 10,000 crore on the company which will then be passed on to consumers, leading to tariff hike.
"Vodafone estimates that apart from the write-off of existing investments, it will cost around Rs 10,000 crore to replace its 900MHz with an 1800MHz network," Vodafone India Resident Director for Regulatory Affairs and Government Relations, T.V. Ramachandran, said in a letter to Telecom Minister Kapil Sibal.
The government has in-principle approved refarming (shifting) of spectrum and was waiting for Telecom Regulatory Authority of India's recommendations in this regard to start the process and formalise it as part of the new telecom policy.
Trai's, in its latest recommendation on 'Auction of Spectrum', has recommended that service provider using 800 and 900 Mhz spectrum band (being used for 2G CDMA and GSM service, respectively) to transmit signals for mobile and other wireless services should be shifted to higher frequency band of 1800 Mhz after the licences come up for renewal.
Ramachandran said this investment in the company's network could have been utilised for providing coverage to around 50,000 additional villages.
"The investment to replace the existing 900MHz network will mean added cost burden for the operator which will translate into higher tariffs for consumers," he said.
Another GSM service provider, Idea Cellular, at the time of Trai's consultation process has said that it will have to write-off Rs 17,000 crore investment that the company has made in its network, if spectrum refarming takes place.
Vodafone's licences in 10 circles are due for renewal in 2014 and 2015 and in each of these circles, the company was given initial spectrum of 4.4 Mhz to start its services.
As per latest Trai recommendation, minimum price per Mhz of spectrum across India in 1800 Mhz, being used by most of the new players for 2G services, will be Rs 3,622 crore.
The spectrum price will be double of this in 800 and 900 Mhz band. Ramachandran said the company will have to install additional 20,000 telecom towers to provide similar level of coverage, it is providing using existing spectrum band.
This will take around 3-5 years for the network to adjust with new frequencies, he added. "The installation of each additional site would imply a significant increase in the usage of power and especially diesel ... which would go against the efforts of the Government for Green Telecommunications," Ramachandran said.
Vodafone is using around 55,000 telecom towers at present to provide telecom service using 900 Mhz band.
"This (refarming) is contrary to the policy objectives of the Government. Trai's proposals, if adopted, will undermine the confidence of investors in the sector and the country," Ramachandran said.
Telecom services providers have been protesting against Trai's recommendation on 'Auction of Spectrum' which has recommended steep high reserve price for spectrum auction.
While global GSMA body has said the recommended prices will discourage companies from participating in the auction, leading telecom services providers have indicated that recommendation, if accepted, will lead to 25 to 30 per cent hike in telecom tariff.