Chennai: Enabling telecom service providers to acquire radio waves from each other, the department of telecommunications (DoT) on Tuesday issued spectrum-trading guidelines. Till now, they could acquire spectrum only from the government through auction.
“Spectrum trading leads to greater competition, provides incentives for innovation, better/new services being available to consumers at cheaper tariffs and better choice to consumers,” the DoT said in a notification.
Unlike in spectrum sharing, the guidelines restrict trading to presently allocated frequencies in 800 Mhz (being used for CDMA mobile services), 900 Mhz (2G and 3G), 1800 Mhz (2G and 4G), 2100 Mhz (3G), 2300 Mhz (4G) and 2500 Mhz (4G).
Only spectrum purchased through auction —except 800 Mhz purchase in 2013 bidding — or for which market rate has been fully paid to the government can be used for trading. For instance, Sistema Shyam Teleservices purchased spectrum in the 2013 auction and is in merger talks with Reliance Communications. The firm will have to pay the remaining airwave price to government if it intends to trade the acquired spectrum.
Ignoring industry opposition, the Centre has decided to impose a transfer fee of 1 per cent of the entire transaction amount on the buyer. Telecom operators will be free to decide the price at which they want to trade spectrum, while the government can levy tax and other charges based on market price, which should not be less than the latest auction-determined price.
Spectrum trading is seen as an exit route for loss-making telcos and offers relief to those with a large subscriber base that need more spectrum. Telecom operators can sell the rights to use spectrum to another operator either in part or full holding at the level of telecom circle.
“Spectrum trading is likely to aid consolidation in the telecom sector and allow for the monetisation of assets from unutilised service areas,” says Rakshit Kachhal, senior analyst at India Ratings and Research.
“The industry could see emergence of four pan-India players (Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm), assuming they will retain spectrum in all licensed service areas (LSAs) while other players may maintain strategic regional presence by trading their spectrum holding in some LSAs. At present, there are over 6-7operators holding spectrum in each of the LSAs.”
On the other hand, spectrum trading will help operators choose LSAs where they want to retain their presence and grow market share, while exiting other LSAs, said an executive of a leading telecom service provider. Trading of spectrum will also help unlock funds stuck in the form of unutilised spectrum, which can be better used to grow infrastructure in LSAs of strategic importance, he added.
Moreover, auctions have a price uncertainty, and escalations in bidding prices similar to the past may prove the acquisition of additional spectrum to be more expensive. The spectrum trading guidelines could also provide marginal players an exit from the industry. For example, Videocon Telecommunications and Quadrant Televentures have witnessed limited market share in a highly competitive market. Spectrum trading could either offer them an exit route or ease their pressures by helping them to focus on their stronger markets, he added.
The guidelines “facilitates ease of doing business by allowing a free play in the commercial decisions and leads to optimisation of resources apart from improving the spectral efficiency and quality of service”, the DoT added.
