Telecom Commission, the highest policy-making body of the Department of Telecommunications (DoT), on Tuesday accepted sector regulator Trai's recommendation on relaxing spectrum-holding caps to 35% from 25% and removal of the intra-band cap of 50% on spectrum holding by operators in a circle.
This decision is a big relief for operators who are going for mergers and acquisitions – Vodafone and Idea Cellular who are set to merge, and Reliance Jio's acquisition of spectrum from Reliance Communications.
However, the proposal will be sent to the Cabinet for a final approval, according to official sources.
Currently, as per rules for spectrum cap, no operator can have more than 25% of the total spectrum allocated in a circle and 50% in a given band.
"One of the issues for consideration before the commission was the overall and intra-band cap on spectrum held by telecom service providers in the context of restructuring of stressed assets. The commission has concurred with the Trai recommendations," a DoT official said.
According to analysts, these recommendations will fast-track all the impending mergers and acquisitions as the industry moves towards a consolidation phase.
Since the entry of RJio, the industry is reeling under financial stress and struggling in a hyper-competitive environment where only three-four major players are likely to survive.
RJio recently announced that it will acquire spectrum, tower, optical fibre network and other wireless assets from Reliance Communications. Earlier, Airtel had announced acquisition of Telenor and wireless assets of Tata Group.
Rajan Mathews, director general of Cellular Operators Association of India, said, "We welcome the decision of the Telecom Commission to increase the overall spectrum cap, as it will facilitate mergers and acquisitions in the sector."
Earlier, an inter-ministerial group (IMG) set up to look into the financial stress faced by telecom players had discussed the issue of relaxation in spectrum caps and sent it to DoT, which subsequently asked for recommendations of Telecom Regulatory Authority of India (Trai) on the same.
In November last year, Trai recommended relaxation of norms -- operators should be allowed to hold 35% of the total spectrum assigned in a circle. Trai also suggested removal of the intra-band cap of 50% on spectrum holding by operators in a circle, but the government should now ensure that an operator does hold more than 50% of all the sub-1GHz band like 700, 800, and 900 MegaHertz put together.
CLSA, in a research note on telecom sector outlook dated January 9, said this year will see the merger of Idea Cellular-Vodafone, the closure of Bharti Airtel's acquisitions of Telenor and Tata Tele, and Reliance Jio's acquisition of Reliance Communications's wireless assets.
"Post these, the sector will transform into a three-player oligopoly with top-three large telcos, one government-owned BSNL/MTNL and Aircel, which is scaling down operations. We see the top-three operators, Bharti, Jio and Idea, gaining an aggregate 86% market share by March 2019 and over 95% of industry revenues by March 2021."
Another report by India Ratings said mounting pricing pressure, debt burden and capital outlay needs have led to the exit of small telecom players, while the larger ones have prepared themselves for the continued challenging environment through asset sales, besides industry consolidation.
"The latest price cut (by Reliance Jio) indicates pricing discipline may still be uncertain and highly dependent on consumer behaviour despite industry consolidation paving the way for long-term structural improvements. This move will further delay Arpu (average revenue per user) recovery. Although current competitive tariffs do not seem sustainable, the short-term Arpu outlook remains subdued, indicating another tough year for the telecom sector," the report said.
The official said DoT will send drafts of the relief package cleared by the Telecom Commission based on the recommendations of an inter-ministerial panel to Cabinet this week for final approval.
The Telecom Commission has also approved the extension of time period for the payment of spectrum bought in auctions by operators to 16 years from the current 10 years, as recommended by the IMG. It has also approved the IMG recommendation to lower the interest rate on penalties paid by telecom operators by about 2%.
OTHER IMPORTANT DECISIONS
- The commission also approved increase in Budget for 'Network for Spectrum' project, under which a dedicated communications network is being set up for defence forces for vacation of spectrum for civilian use, from Rs 11,330 crore to Rs 24,664 crore
- Also, 25000 WiFi chaupals in Uttar Pradesh will be set up at a cost of Rs 400 crore
- An approval was given to upgrade an earlier project to provide 2G mobile services in Andaman and Nicobar islands to 4G mobile services at a cost of Rs 343 crore, as against earlier approved Rs 262 crore
- Another proposal to provide satellite connectivity to 5,298 gram panchayats, of which about 4,240 GPs are in North East and about 800 GPs are in Jammu and Kashmir, at a cost of Rs 916 crore for three years has also been approved
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Telecom sector")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}