Regulatory Authority of India (Trai) has recommended relaxing the rules for spectrum-holding caps, a move that will benefit operators such as Vodafone
and Idea Cellular
to retain their airwaves after the merger as also allow other telcos to get more spectrum
in a particular band.
has recommended raising the 25 per cent overall spectrum
limit to 35 per cent whereas the 50 per cent intra-band cap has been removed. In place of it, the regulator has proposed having a cap of 50 per cent on the combined spectrum
holding in the sub-1 GHz bands (700, 800 and 900 MHz).
The relaxation in the 50 per cent cap will let Reliance Jio enter into agreements with players such as Reliance Communications if it wants to get more spectrum
in the 800 MHz band.
Market leader Bharti Airtel has supported increasing the spectrum
cap to 33 per cent while advocating retaining the 50 per cent limit whereas Reliance Jio is 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 as spectrum
was bought through auctions, and operators could deploy any technology on a spectrum
Reliance Communications, which has declared closing down its 2G and 3G services, had supported abolishing the intra-band cap of 50 per cent. The spectrum
cap is the limit of airwaves a telecom
operator can hold. The cap or ceiling currently stands at 50 per cent in a spectrum
band and 25 per cent of the spectrum
assigned in a telecom
circle to an operator.
The Department of Telecommunications (DoT) will take a call on the recommendations. The inter-ministerial group (IMG), which was formed to address the financial stress of the telecom
sector, had asked the DoT to seek Trai’s views on spectrum
caps and see if the limits should be relaxed or not.
After the go-ahead from the DoT, the revised spectrum
cap rules and other recommendations of the IMG will be sent to the Cabinet. The Telecom
Commission (TC), which is the highest decision-making body of the DoT, has approved the IMG recommendations of giving relief to telecom
operators by increasing the spectrum
payment tenure to 16 years and change in the interest rate from the PLR (prime lending rate) to the MCLR (marginal cost of funds-based lending rate).
According to Trai, the spectrum
cap of 25 per cent was imposed at a time when there were six-ten telecom
service providers (TSPs) in a licensed service area (LSA) but given the ongoing consolidation in the sector, the number of TSPs in a circle may be fewer.
“Some merger proposals have already been filed while some are still in process. M&A guidelines allow holding 50% of market share in terms of subscriber base as well as revenue. Therefore, 25% cap on overall spectrum
holding may put constraint on the ongoing consolidation phase,” Trai
fears the 25 per cent cap might restrict the capability to purchase additional spectrum
in auctions. In the last auction held in October last year, there was no bidder for spectrum
in the 700 MHz band. “If the overall spectrum
cap is revised to 35 per cent from the present level of 25 per cent; theoretically, there may be minimum 3 TSPs in each LSA. However, each TSP is unlikely to have equal amount of spectrum; therefore, in the more likely scenario, there will be minimum 4 TSPs in each LSA. It would balance the need to promote consolidation in the telecom
industry and to ensure enough competition in the market at the same time,” the regulator added.
Regarding the 50 per cent cap, Trai
said considering the fact that the LTE device eco system was evolving in each spectrum
band, there was no need to put a spectrum
cap in it. “In fact, asking a TSP to acquire spectrum
in different band to deploy the same technology increases the cost of network with no real gains,” it said.
feels that licensees should decide the combination of spectrum
bands which they want within an overall spectrum
said as lower frequencies offered significantly superior quality and were relatively scarce, TSPs with exclusive rights over sub-1 GHz spectrum
would have a competitive advantage over others and thus might create a non-level playing field. Therefore, it is essential to have a cap on the spectrum
holding in the sub-1 GHz bands. But, retaining an individual spectrum
intra-band cap may also result in an unwarranted fragmentation of spectrum.
In case of a merger of two licensees, both having spectrum
in any of the sub-1 GHz bands, the combined entity may be required to shed smaller blocks of it if the combined spectrum
holding exceeds the intra-band cap of 50 per cent.
Therefore, “the Authority is of the opinion that the current intra-band cap should be removed. Instead, there should be a cap of 50 per cent on the combined spectrum
holding in the sub-1 GHz bands (700 MHz, 800 MHz and 900 MHz bands)”.