Telecom operators asked to stop 3G roaming again

In yet another jolt to telecom operators, the Department of Telecommunication (DoT) is sending out notices to telecom operators to stop intra-circle 3G (third generation) roaming immediately.

“I expect that today (Friday) show-cause notices will go to those who have breached the 3G guidelines, and they will be asked to stop offering services outside their licensed zones with immediate effect,” telecom secretary R Chandrashekhar said.

He said, however, that the operators would be given 60 days to respond to the notice.

Intra-circle roaming implies providing services to subscribers outside of a telco’s licensed zone of operation by entering into roaming arrangements at a mutually acceptable fee between partner operators.

In December 2011, the government declared it illegal for operators to get into 3G roaming agreements between themselves on the ground that this was causing huge losses to the exchequer.

However, industry body Cellular Operators Association of India (COAI) approached the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) challenging the government’s order.
In July, the TDSAT gave a split verdict, and the carriers went on offering 3G services as before.

Rajan Matthews, director-general, COAI, alleged that the government has gone back on its word allowing 3G roaming. “At the time of submitting the Notice Inviting Applications (NIAs) for 3G, the government had clearly said that 3G roaming would be allowed in case such a scenario came up. Owing to the high cost of 3G spectrum, no operator was able to get a pan-India 3G licence, and hence they were forced to go in for 3G roaming pacts.

It was at this time that the government raised an issue and called intra-circle roaming illegal, stating that there was no ‘written evidence’ of the same. At that time, they sent out notices asking operators to stop 3G roaming with immediate effect. Thus, we approached the TDSAT, which gave a split verdict and now the DoT has apparently sent a fresh round of notices banning intra-circle 3G roaming.”

Although 3G subscribers still make up only 2-3% of the total telecom base, numbering around 50 million out of a total of over 900 million, they represent a lucrative amount of revenues for operators that are set to rapidly increase with exponential demand for data services.

A considerable number of these 3G subscribers also fall in the 3G roaming category.

“The impact will be strongly felt, despite 3G not being a major Ebitda driver for telcos. In case operators are faced with a scenario where they have to stop roaming immediately, they may ask affected subscribers to port out to another 3G operator.

However, in such a scenario, the subscriber loss will be somewhat quelled due to more or less equal re-distribution of 3G subscribers among the top three operators. Operators like Aircel, RCom or Tata may, however, face more leakage in this case,” said Rohit Chordia, telecom analyst with Kotak Securities.

Bharti Airtel, Vodafone and Idea Cellular have entered into the most roaming pacts with each other.

Of these, Idea Cellular claims to have the largest number of 3G subscribers across the country, numbering 4 million.
Officials of these companies declined to comment.

To be sure, the operators will not go down without a fight, Matthews indicated.

“Operators have not received any notice thus far. Once we receive the notices, we will evaluate them and then decide whether to approach the TDSAT again or go to a higher court. However, in case the DoT decides to suspend 3G services before the 60-day period, it will impact 30 million 3G subscribers, 20% of whom are on roaming.” He said it would be difficult to determine the actual loss, as 3G services were calculated separately for data and voice.

The latest development only adds to the uncertainty surrounding the sector since the cancellation of 122 second generation, or 2G, licences by the Supreme Court.

In a pre-bid meeting for the 2G auctions scheduled for November, where telecom operators whose licences were cancelled have a chance of winning them back, the government was asked to give a written assurance, which would also be legally binding regarding all responses from the government in the 2G auction NIAs. This was no doubt on account of the prevailing confusion on the 3G roaming issue.

However, yet again, the government skirted the issue and did not commit to providing the written clarification.