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Trai recommends relaxing overall spectrum cap to 35%

Says rules restricting operators from holding more than 50% spectrum in each band should be removed

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Telecom regulator Trai has recommended to relax overall spectrum holdings cap to 35% from the current limit of 25%, which will benefit telecom players such as Vodafone and Idea Cellular as they will be able to retain more spectrum post their merger.

With respect to mergers and acquisitions, Telecom Regulatory Authority of India (Trai) said rules restricting operators from holding more than 50% spectrum in each band should be removed. The telecom market is estimated to become a five-player market, Trai said in its recommendations to the Department of Telecommunications (DoT).

"Some TSPs (telecom service providers) submitted that at the time of fixation of the overall spectrum holding cap at 25%, there were seven to twelve operators. Ongoing consolidation is likely to result in four operators per service area. According to these TSPs, the overall cap of 25% would tantamount to a mandated near equi-distribution of spectrum, which may not be a practical market outcome as different players are at different stages of network development with different growth plans and spectrum requirements," Trai said.

The regulator said the M&A guidelines for sector allow holding 50% of market share in terms of subscriber base as well as revenue, hence a 25% cap on overall spectrum holding may put a constraint on the ongoing consolidation phase.

The rules restricting companies from holding spectrum in each band should be removed and there should be a cap of 50% on the combined spectrum holding.

"The authority is of the opinion that the current intra-band cap should be removed. Instead, there should be a cap of 50% on the combined spectrum holding in the sub-1 GHz bands (700 MegaHertz (MHz), 800 MHz and 900 MHz bands)," Trai added.

The telecom market is in the midst of a consolidation where Vodafone and Idea Cellular have announced a merger; Airtel has acquired Telenor and wireless business of Tata Group.

The recommendations are in response to DoT's letter in September this year seeking Trai's views on the issues relating to spectrum cap in different circles.

"This (equi-distribution of spectrum) would again risk spectrum remaining unsold in the market as spectrum not wanted by one operator, would be denied to another, who would be constrained because of the spectrum caps," Trai added.

The objective of prescribing spectrum cap is to prevent large holdings of spectrum by one or a few TSPs which otherwise may create concerns about the competition in the market.

The current intra-band cap should be removed and instead, there should be a cap of 50% on the combined spectrum holding in the sub-1 GigaHertz bands – 700 MHz, 800 MHz and 900 MHz bands.

Currently, the rules bar any company from holding more than 25% spectrum allocated in a service area or circle, and above 50% in a spectrum band.

The recommendations will go to the DoT for approval, and subsequently to Cabinet, which will give its final stamp of approval.

TOWER CALL

  • Trai said the M&A guidelines for sector allow holding 50% of market share in terms of subscriber base as well as revenue
     
  • Hence, a 25% cap on overall spectrum holding may put a constraint on the ongoing consolidation phase
     
  • Currently, the rules bar any company from holding more than 25% spectrum allocated in a service area or circle, and above 50% in a spectrum band
     
  • The recommendations are in response to DoT's letter in September this year seeking Trai's views on the issues relating to spectrum cap in different circles
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