Govt hikes spectrum limit but stays silent on pricing

NEW DELHI: The government on Wednesday unveiled new norms for the telecom sector that propose to delink licences from spectrum, which is unlikely to come for free, apart from easing the merger and acquisition rules and a uniform revenue sharing regime.

The guidelines announced by communications & IT minister Kapil Sibal at a press conference were, however, silent on how spectrum would be priced. It also did not specify how the government would deal with mobile operators holding spectrum beyond 6.2 MHz. Although auction was the preferred option, the minister said the government was studying the Supreme Court order which had suggested that spectrum and other natural resources be allocated through a bidding process. Sibal said the government was studying the "implications and ramifications" of the judgment that also cancelled 122 2G licences awarded by former telecom minister A Raja, who is now in jail facing criminal charges.

The New Telecom Policy, which will replace the last one formulated in 1999, is expected to be announced in April and will deal with the remaining aspects. Sibal said the new norms will help subscribers get better services and at affordable rates due to more efficient usage of spectrum.

What hasn't gone down too well with operators is the proposal to shift to a uniform licence fee of 8% in two phases, starting April, from the 6-10% range at present. Bharti Airtel suggested that the fee be pegged at 6%. Earlier too, telecom companies were lobbying for a lower fee arguing that tariff will rise. Vodafone said the move towards uniform licence fee was a long-standing demand of the industry.

The overall package, however, seemed to be favourable for telecom operators. To begin with, the new norms on "simple, quick" consolidation permit the combined entity formed through merger to have a market share of up to 35%. In fact, this may be relaxed further to 60% after consulting Telecom Regulatory Authority of India ( Trai) that had recommended this. There will be an additional cap, stipulating that the merged entity cannot hold over 25% of the available spectrum in a circle.

"The announcement on merger and acquisition is an encouraging step from the point of view of the long-term health of the telecom industry and will pave the way for consolidation in an over-crowded market," Bharti Airtel, the country's largest mobile operator, said in a statement.

In addition, telecom companies seem to be in line to get more spectrum. Against the current prescribed limit of 6.2 MHz, they will now get 2x8 Mhz in all circles other than Delhi and Mumbai, where it will be 2x10 Mhz. Players will be permitted to acquire additional frequency in the open market in case there is auction.