Spectrum can be shared by two: Trai

Move could help companies significantly reduce the cost of mobile services

The Telecom Regulatory Authority of India (Trai) on Monday released much-awaited guidelines on sharing of radio frequencies in all bands among debt-laden cellphone service providers, to optimally use limited air waves.

Mobile operators are allowed to share network infrastructure like cellphone towers, which has helped them reduce costs, but not air waves.

Two companies could share spectrum if they held it in a common band in a service area and if the radio frequencies were bought in auction or at market price, Trai said in its recommendations to the department of telecommunications (DoT), which can accept them or seek clarifications.

“Spectrum in the bands of 800/900/1,800/2,100/2,300/2,500 MHz will be sharable provided both the licensees are having spectrum in the same band,” Trai said. In an earlier recommendation, the telecom regulator had recommended frequencies in use for third generation (3G) cellular services not be shared.

Earlier this month, the Economic Survey had suggested better spectrum management through trading and sharing to bring down the cost of this limited resource.

Bharti Airtel, Vodafone and Idea Cellular can unclog their networks in Delhi and Mumbai by borrowing air waves. Other operators like Tata Teleservices and Aircel can make money by lending unused radio frequencies. Subscribers stand to gain as fewer calls drop and surfing speeds rise. Rates could fall, too, as spectrum auctions turn less fierce.

“Spectrum sharing will be restricted to only two licensees subject to the condition that there will be at least two independent networks provided in the same band,” the regulator said and added the DoT should charge a Rs 50,000 fee from a cellphone service company for each area it intends to share air waves in.

Trai also suggested the spectrum use charge for those sharing be increased by 0.50 per cent for both operators. It added that if Company X got into a sharing agreement with Company Y, half the spectrum held by Company Y should be considered as additional spectrum held by Company X in a specific band, and vice-versa. Regulations permit cellphone service providers a maximum of 50 per cent of the radio frequencies assigned in a circle and 25 per cent in a frequency band.

If either or both of operators sharing air waves were allocated spectrum without auction, Trai recommended they be permitted to offer only services that can be provided through administratively held spectrum.

The government must consider companies sharing air waves in an entire service area and not in parts, the regulator said. This will help it calculate the adjusted gross revenue, which is linked to the government’s income from telecom services.

“The regulator could have made it much simpler. It could have opted for a simpler spectrum use charge, and could have looked into permitting spectrum sharing among more than two operators. Also, keeping it band specific limits growth,” said Rajan Mathews, director-general of the  Cellular Operators Association of India. As these were not final guidelines, there would be some tweaks to support the industry, he added.

Jaideep Ghosh, Partner, KPMG in India, said: “Trai has taken cognizance of the practical challenges which may arise when operators try to share the spectrum, e.g., need for coordinated network planning, actual realised capacity in a sharing scenario to be lower compared to a scenario where operator acquires the spectrum on its own. This is reflected in the reasonable increase in spectrum charge as well as nominal charges to be paid to the government.”

Hemant Joshi, partner in consultancy firm Deloitte Haskins & Sells, said, “The government’s purpose of optimally utilising spectrum through sharing will be achieved if it decides not to levy the additional user charges and not to restrict sharing to bands.”

Incumbent operators like Bharti Airtel, Vodafone India and Idea Cellular, who have been looking to increase their spectrum holding in high-density circles like Delhi and Mumbai, will get a new avenue with the Government formally permitting sharing of spectrum. Operators like Tata Teleservices and Aircel will get a chance to monetise sharing their unused spectrum holding.

 

Mobile users, on the other hand, are likely to get better service, especially less call drops and better data speed. Tariffs may actually fall as operating expenses of operators will come down.

 

However, the Government may see less aggressive bidding in the upcoming auctions which may result into less earning for the Government from auctions.

 

While the Government has earlier this year announced guidelines for merger and acquisitions (M&A) for the telecom industry, the industry has been waiting for the key guidelines on sharing and trading of spectrum. Trai had already given its recommendations on trading of spectrum. With clarity on sharing and trading of spectrum, the telecom industry, which is sitting on a cumulative debt of about Rs 2.5 lakh crore, is likely to see some consolidation.