Good news for telcos; spectrum-holding cap to be relaxed

The move will help telcos, including Reliance Jio, Vodafone, and Idea Cellular

In a move that will boost consolidation and help stressed companies exit the sector, the Telecom Commission (TC) has approved the recommendations of the Telecom Regulatory Authority of India (Trai) on relaxing spectrum-holding caps for mobile operators.

The move will help telcos, including Reliance Jio, Vodafone, and Idea Cellular.

Sectoral regulator Trai in November last year had proposed raising the 25 per cent overall spectrum-holding limit to 35 per cent and also removing the cap of 50 per cent holding in the same band.

In place of it, the regulator had recommended having a cap of 50 per cent on the combined spectrum holding in the sub-1 gigahertz (GHz) bands (700, 800, and 900 megahertz, or MHz).

The TC, which is the highest decision-making body in the Department of Telecommunications (DoT), has approved the recommendations of Trai, and this will help the stressed telcos to exit and also provide an opportunity to bigger players to have more spectrum in their kitty.

“There were five-six items considered by the TC and it has concurred with Trai’s recommendations, which basically recommended increasing the overall spectrum cap from 25 to 35 per cent and a cap of 50 per cent on the sub-1 GHz (700 MHz, 800 MHz, and 900 MHz),” a top source in the DoT said.

The relaxation was part of the proposals of an inter-ministerial group (IMG), formed in June last year to address the stress in the telecom sector.

The IMG had recommended increasing the tenure of paying for spectrum to 16 years and shift from the prime lending rate to the marginal cost of funds-based lending rate.

On the issue of spectrum caps, the IMG had asked the DoT to take the opinion of Trai.

The TC had earlier approved the IMG recommendations on the spectrum payment tenure and the interest rate shift.

Now with the approval of the spectrum cap matter too, the issues will be sent to the Cabinet for approval.

Reacting to the TC decision, Cellular Operators Association of India Director General Rajan Mathews said, “We welcome the decision of the TC to increase the overall spectrum cap as it will facilitate mergers and acquisitions in the sector.”

The relaxation in the 50 per cent cap will let Reliance Jio retain most of the airwaves in the 800 MHz band after the acquisition of Reliance Communications’ assets.

Also, Vodafone and Idea Cellular will be able to retain most of their airwaves after their merger.

According to people in the DoT, surrendering spectrum was not a viable or preferred option for telecom operators in the case of mergers and acquisitions but with the relaxation of spectrum cap rules, consolidation will pick up.

“For consolidation to happen, the relaxation is essential because the other option of surrendering spectrum was not recommended by the IMG, whereas this is a realistic proposition,” the source added.

Market leader Bharti Airtel had supported increasing the spectrum cap to 33 per cent while advocating retaining the 50 per cent limit whereas Reliance Jio was in favour of retaining the 25 per cent cap and removing the 50 per cent limit.

Others, including Vodafone and Idea Cellular, had supported removing the concept of capping because spectrum was bought through auctions, and operators could deploy any technology on a spectrum band.

The other proposals approved include the network for spectrum project (NFS) for the defence forces.

The outlay for the project has now been enhanced to around Rs 247 billion from Rs 113 billion earlier.

State-run BSNL is the implementing agency for the project.

The NFS project approval will go to Cabinet for the final nod.

Other proposals approved include the issuance of Category B licence for virtual network operators.

The Category B licence will be limited to wireline services.

The TC also approved setting up WiFi hotspots in gram panchayats in Uttar Pradesh, Himachal Pradesh, and Rajasthan, and providing connectivity in the Northeast through satellite and connecting the Andaman and Nicobar Islands.

A win-win for all

Vodafone, Idea Cellular can retain all their airwaves after merger Reliance Jio will benefit, to get more spectrum in 800 MHz from Reliance Communications (RCom) RCom can sell or trade the remaining spectrum it has in 800 MHz Airtel can also increase its overall spectrum holding Aircel can explore options to trade or sell its airwaves

Photograph: Reuters