The government may permit intra-circle licence acquisitions by cellular firms if they are willing to surrender the spectrum allocation belonging to the acquired company.

Senior government officials said such a move would ensure a level playing field for the acquirer and other cellular service providers in the same circle.

By re-auctioning the freed spectrum allocation, the government will not only maintain the number of operators in a circle at four but also bring additional revenue to the exchequer.

"The policy is to have four cellular operators in a circle. The move will let market dynamics drive growth. If we allow operators to acquire licences without surrendering spectrum allocation, it may lead to the creation of monopolies," a source in the communication ministry said.

Cellular services firms, however, said acquiring a mobile licence without the spectrum allocation was a loss-making proposition since the primary raw material for cellular services was radiowaves.

They pointed out that the licence fee paid by an operator was for the spectrum allocation. Cell firms were also of the opinion that the 6.2 mhz spectrum allocated by the government was not enough to provide top-class services.

The government last week notified that mobile operators could merge or demerge cellular licences in different circles, but did not permit acquisition within the same circle.

Operators are now allocated up to 6.2 mhz of spectrum in a circle. Government officials said if a service provider acquired another cellular licence in the same circle it would have 12.4 mhz, while the rest of the operators would be left with only 6.2 mhz each.

"As it is, most cellular operators are not fully utilising their spectrum allocation. Airtel, for instance, is the only company which has got over 1 million subscribers in a circle. So mobile operators can easily accommodate the existing subscribers as well as the acquired ones with 6.2 mhz," an official explained.

In case the number of subscribers is more than what can be accommodated in the allocated spectrum, the government may release fresh frequency.

Cell proposal

• Government officials say the move will ensure a level playing field for the acquirer and other cellular service providers in the same circle.
• The government wants to maintain the number of operators in a circle at four.
• Cellular services firms say acquiring a mobile licence without the spectrum allocation is a loss-making proposition.