Telecom companies may get to trade, share spectrum

NEW DELHI: Ahead of announcing a fresh spectrum auction, the government is expected to give a go-ahead to trading and sharing of spectrum between telecom operators, while also recommending a uniform Spectrum Usage Charge (SUC) for various telecom services.

According to top government sources, the idea is to create a conducive environment before the start of auctions and signal an industry-friendly approach adopted by the Department of Telecom (DoT). The moves, it is felt, are crucial to ensure healthy participation by telecom operators in the auction as well as to encourage an aggressive bidding. “These measures will soon be announced and are positive elements to improve sentiment,” a highly-placed source said.
The steps assume significance in view of the lukewarm response to the auctions in the last two rounds — November ’12 and March ’13 — where most of the operators stayed away, complaining of high prices and a disabling environment.

The new measures also come at a time when the government appears to have made up its mind to go with the lower floor price for spectrum recommended by the Telecom Regulatory Authority of India (Trai). “All these measures, when combined , will make the new spectrum auctions very lucrative,” another source said. The sources said the government will give an in-principle agreement to spectrum trading and sharing in the notice inviting applications (NIA) for the new sale. The broader regulations will be worked out later. “The modalities can be worked out and may take time.”

In its recommendations on valuation and reserve price of spectrum submitted on September 9, Trai had also sought spectrum trading. “Operators will be more willing to invest in spectrum with the knowledge that they have the opportunity to sell the spectrum rights, in case their business models are not successful... spectrum trading may lead to greater competition , provide incentives for innovation , greater certainty to service providers over their rights on spectrum…,” it said.

However, Trai’s view was objected to by an internal committee of DoT which, among other things, pointed out that companies only win rights to use spectrum and their licence has no provision for transfer of ownership.

Analysts feel that the move will be positive. “It is a very progressive move and will allow efficient utilization of resources ,” said Prashant Singhal, telecom leader at Ernst & Young. On SUC, the government wants to move towards a “uniform rate” against the current practice where carriers pay 3-8 %, depending on their spectrum holding. “There will be measured and calibrated steps over a period of time. Some road map will be made known before the auctions,” the government source said.

Trai has already recommended that SUC be set at a flat 3% of companies’ revenue for the spectrum they buy from auctions. While this would be beneficial for older operators which have sizeable spectrum holding, many others like RCOM, Tata Tele and Reliance Jio are understood to be against the move.