BW Communities

Set For A New Innings

Anup Jayaram Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[It has been in the pipeline for awhile. Communication and information technology minister Kapil Sibal announced the broad direction of India's telecom policy that will come into effect from April 2012. It looks to simplify licensing, bring transparency to the sector and encourage consolidation. Most of the changes will help incumbent mobile telecom service providers. This is the third time that India has come up with a telecom policy. The first was in 1994, followed by the NTP '99. As a first step, all future licences will be unified licences and allocation of spectrum will be delinked from the licence. Spectrum will have to be obtained separately. However, Sibal has not gone into the issue of spectrum pricing since the Telecom Regulatory Authority of India (Trai) is currently in the process of finding a base price for the auction of 2G spectrum. To encourage consolidation in the industry, the government announced that ‘merger up to 35 per cent market share (subscriber base and adjusted gross revenue) of the resultant entity will be allowed through a simple quick procedure.' The earlier limit was 30 per cent. The government is also open to considering allowing mergers where the combined entities can hold up to 60 per cent of market share. However, the merged entity cannot have more than 25 per cent of the assigned spectrum in a circle. Says a Bharti official: "The announcement on merger & acquisition is an encouraging step from the point of view of the long-term health of the telecom industry and will pave way for consolidation in an over-crowded market." In a move that is welcomed by incumbent operators, it has hiked the prescribed limit of spectrum from the current 6.2 MHz to 8 MHz across the country. In Delhi and Mumbai, it has been hiked further to 10 MHz. As a result, operators will exceed the new limit in only a handful of circles. The government has specified a flat 8 per cent licence fee across the country—the current rates vary between 6-8 per cent depending on the circle. Bharti Airtel said the uniform licence fee across different telecom licences and service areas will help avoid any arbitrage opportunity. It hopes the government would consider lowering the licence fee to 6 per cent over the next couple of year, as recommended by the TRAI. Vodafone officials welcomed the introduction of a uniform licence fee across all telecom licenses and service areas regime starting from April 2012 saying that this has been a long standing request of the industry. The first steps to the clean-up have begun. Once Trai comes up with its recommendations, the auction of 2G spectrum should begin.