Telco mergers made easier, sharing of spectrum tougher

Sharing rejected for 3G operators, restricted for 2G

The government has approved mergers between telecom companies with a combined market share of 35 per cent and rejected spectrum-sharing among 3G operators while restricting it for 2G operators. The New Telecom Policy announced by communications minister Kapil Sibal on Wednesday would be a dampener for 3G operators such as Vodafone, Idea Cellular and Bharti, which had signed roaming agreements to share 3G spectrum in circles they had no spectrum in.

The three operators had challenged an earlier government decision to this effect before the TDSAT. Operators had forked out Rs 65,000 crore for 3G spectrum, and none was able to get pan-India spectrum. Many were hoping the government would liberalise the sharing of 3G spectrum.

Operators can now share 2G spectrum only in the same service area and those sharing it should hold spectrum. It means operators having spectrum in a few circles cannot enter into roaming agreements in circles where they do not. The sharing will initially be allowed for five years and could be renewed for another five on terms to be prescribed.

Currently, mergers are allowed only if the combined market share of the entities does not exceed 30 per cent. That has been raised to 35 per cent. The modalities for mergers in case of a combined market share of 35-60 per cent will be finalised after Trai recommendations. Under the new rules, the combined entity can hold 25 per cent of the total spectrum in a circle.

In another move that may force a few incumbent operators to give back some spectrum, the department of telecom (DoT) has prescribed a limit of 2x8 MHz to be assigned to a GSM service provider and 2x5 MHz for CDMA players while renewing licences for another 10 years. Taking into consideration the higher density in the two key metros of Delhi and Mumbai, the limit will be 2x10 MHz and 2x6.25 MHz for GSM and CDMA players, respectively.

An operator can acquire additional spectrum beyond these prescribed limits through a market mechanism. Operators keen to extend the licence will have to pay a fee of Rs 2 crore for metro and 'A' circles, Rs 1 crore for 'B' circles and Rs 50 lakh for 'C' circles. Earlier, the operators were assigned spectrum based on subscriber-linked criteria. DoT has accepted the recommendation for refarming of spectrum but spectrum trading and leasing have not been allowed. On the contentious issue of incumbent operators having to pay a one-time charge for extra spectrum held by them beyond 6.2 MHz, Sibal said a decision would be taken later in view of the Supreme Court judgment that cancelled 122 licences issued in 2008.

Telecom major Vodafone welcomed the decisions. “Vodafone welcomes the introduction of a uniform licence fee across all licences and service areas regime, starting April 2012. We also support the decision to delink spectrum and licence and allow licensees to acquire spectrum through auctions,” it said.