Trai suggests outright transfer of purchased spectrum, bars leasing

The Telecom Regulatory Authority of India (Trai) on Tuesday cleared the working guidelines for spectrum trading, allowing cellular operators to buy and sell spectrum. However, it has recommended leasing of airwaves be barred, for now.

Spectrum trading refers to the transfer of rights to use spectrum. Under such trading, only outright transfer of spectrum (ownership of the usage right is transferred to the buyer) is allowed, according to Trai guidelines.

In a statement, Trai said mobile operators could trade spectrum they had bought through auction or by paying a market price. But administratively allocated spectrum couldn’t be traded, it said. “Under spectrum trading, only outright transfer of spectrum is permitted…Spectrum leasing is not permitted at this point of time,” Trai said.

It added the government might collect a fee of one per cent of the transaction amount on spectrum traded between telecom companies.

Companies trading spectrum would have to notify the Department of Telecommunications (DoT) about the quantity of spectrum being sold, as well as the price.

Earlier, an empowered group of ministers on telecom, headed by Finance Minister P Chidambaram, had cleared spectrum trading after the Telecom Commission gave an in-principle approval in this regard in October 2013. Subsequently, Trai was asked to give detailed guidelines for such trade.

Based on the Trai guidelines, the DoT will prepare a final notification. The guidelines on mergers and acquisitions (M&A) are likely to have the details of spectrum trading. It is expected DoT will notify the final M&A guidelines next week.

“The authority analysed the draft guidelines submitted by the steering committee (of Trai, which included telecom firms) and has finalised recommendations on ‘working guidelines for spectrum trading’,” Trai Secretary Sudhir Gupta wrote to M F Farooqui, DoT secretary.

The government has allowed acquisition of spectrum through auctions alone. Experts believe spectrum trading will change the sector, as it will ensure more efficient use of spectrum by telecom operators, especially those with fewer subscribers.

Trai has also suggested a lock-in period for the spectrum traded. If a company buys spectrum through the trading route, it will not be allowed to sell airwaves in the same frequency band for two years.

Hemant Joshi, partner, Deloitte Haskins & Sells said, “Spectrum trading is allowed only for spectrum for which market price has been paid. So, spectrum acquired through the administrative mechanism cannot be traded till a one-time spectrum price is paid…In addition, spectrum for the full-service area has to be sold and cannot be done for the part of the service area, which would have been made spectrum usage more efficient. The one per cent transaction fee to be paid to the government might also act as dampener for the actual trading.”

According to Trai guidelines, the words ‘seller’ and ‘buyer’ are used in the context of transferring the rights from one user to another. When a block of spectrum is traded, the associated rights and obligations of the spectrum block will be transferred from the seller to the buyer. Spectrum trading will not alter the original validity period of spectrum assignment.

A licensee wouldn’t be allowed to trade in spectrum if it was established the process was in breach of terms and conditions of the licence, and the licensor had ordered revocation/termination of the licence, Trai said. As of now, spectrum trading will be permitted only on a pan-LSA (licensed service area) basis (spectrum cannot be traded for a part of any particular licence area).

While the buyer or the seller will not need the government’s approval to trade in spectrum, they will have to inform the licensor about the trade six weeks before the effective date of trade.

Trai also recommended telecom operators holding spectrum across services — 2G, 3G, 4G (BWA) and CDMA — be allowed to trade radiowaves.