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Telecom Spectrum Trading to Be Allowed at Last Auction Prices

Telecom Spectrum Trading to Be Allowed at Last Auction Prices

By Press Trust of India | Updated: 18 September 2015 12:57 IST

Telecom companies would be allowed to trade spectrum at a price achieved in the latest auction of airwaves or higher than that, an official source said.

"There has been no change in Telecom Commission's decision on market-determined price. Price achieved in spectrum auction will be applicable on trading deals throughout that financial year and after that SBI Prime Lending Rate will be added for calculating spectrum price," a senior government official told PTI.

The government, which approved spectrum trading guidelines on September 9, is yet to come out with details of the much-awaited policy. It is for the first time operators have been allowed to sell rights to use spectrum to other operators.

The Cabinet, on August 12, approved spectrum sharing guidelines, which allow mutual sharing of spectrum. These two guidelines are expected to address shortage of spectrum, improve quality of mobile services and reduce call drops. These will lead to consolidation in the sector. The industry is awaiting detailed spectrum sharing and trading guidelines from the Department of Telecom before they start working on any deal.

"The process for internal vetting and approval is on. Telecom secretary has already held a meeting on this and everything has been clarified. I expect guidelines for both spectrum sharing and trading to be issued very shortly. It should not take much time," the official said. Deloitte Haskins & Sells LLP Partner Hemant Joshi said that spectrum trading would provide bigger players with congested networks a chance to buy new spectrum and improve the quality of service for customers.

"Spectrum trading would provide exit opportunity to operators who have not been able to build scale in India and have been facing unprofitable operations by selling off their spectrum," Joshi said.

As per India Ratings and Research (Ind-Ra), with these new norms, the industry could see emergence of four pan-India players - Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm - while others may exit.

A report of Bank of America-Merrill Lynch made similar observations, which said RCom could liberalise its 800 MHz spectrum and hand it over to Reliance Jio for 4G services. "Jio could possibly partner with RCom post trading and sharing," the BofA-Merrill Lynch report by analysts Sachin Salgaonkar and Karan Parmanandka said.

Credit rating agency Fitch said, "Smaller telcos - including Tata Telecom, Videocon Telecom and Aircel - suffer operating losses, are struggling to gain market share, and are saddled with high debt. These businesses could trade their under-utilised spectrum assets with larger telcos in loss-making Indian circles to focus only on profitable ones."

Videocon Telecommunications Director and CEO Arvind Bali rebutted Fitch observations and said: "I think it's too early for anyone to comment on our financial and business health. We are a long-term and serious player, and we are here to stay."

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