Industry lauds spectrum trading, but needs clarity

Spectrum trading guidelines approved by the government that allow telecom operators to sell radiowaves to the other will bring relief to the industry, improve service quality and give exit route to loss-making telecom operators, say industry experts.
Though the industry has lauded approval of the guidelines, it has cited the need for further clarifications on market determined price at the time a company signs pact and the spectrum cap in the sector.
"This was an industry demand which the Prime Minister has approved today. It addresses issue of spectrum crunch, but I don't see it as a big game changer unless certain things like spectrum cap, calculation of trading fee as AGR and determination of market fee are clarified," Industry body COAI Director General Rajan S Mathews told PTI.

He said spectrum will be purchased by big players which have a growing subscriber base. And if spectrum cap is not raised, they will not be able to make any deal, in which case trading provision will "be not of any use".
The spectrum cap, the limit of airwaves a telecom operator can hold for providing wireless service, is 50 per cent in a spectrum band identified fit for transmitting mobile signals and 25 per cent of the total such spectrum assigned in a telecom circle.
"Clarification on spectrum cap would be critical. Then, taxing a transfer price does not make sense. If the government has proposed to count trading revenue as AGR, then it should allow some offset as is done in the case of AGR," Mathews said.

Ernst & Young Global Telecommunications Leader Prashant Singhal said this provision could prove to be a deterrent to trading as this effectively entails a 13 per cent levy, which is eight per cent licence fee and five per cent spectrum usage charge for the seller.

He, however, said spectrum trading is a major boost for the Indian telecom industry, which is currently suffering from shortage of spectrum leading to Quality of Service (QoS) issues and call drops.
As per a Bank of America-Merrill Lynch report, telecom players like RCom could liberalise its 800 MHz spectrum and hand it to Reliance Jio to use for 4G services.

"We consider these norms to be positive for the industry as it would facilitate consolidation in absence of any friendly merger and acquisition rules. Jio could possibly partner with RCom post trading and sharing," the BofA-Merrill Lynch report by analysts Sachin Salgaonkar and Karan Parmanandka said.
The report added that it will adversely impact business of mobile tower companies as less number of towers will be required.