Trai recommended spectrum caps will accommodate emerging oligopoly
Telecom Regulatory Authority of India (Trai) has recommended removing caps on spectrum holding in individual bands, besides increasing the overall ceiling for spectrum holdings.
It has recommended that the overall spectrum cap should be increased to 35% from the current 25%. Intuitively, this makes sense, because analysts expect Bharti Airtel Ltd, the Vodafone-Idea combine and Reliance Jio Infocomm Ltd to end up with roughly 95% of the market in a few years, with the remaining in the hands of state-owned companies. With revenue market share quickly consolidating among these three companies, making adequate room for spectrum holdings seems like the logical thing to do.
However, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd’s (MTNL) share of spectrum is expected to be far higher compared to share of revenue.
As such, the existing 25% cap should easily accommodate the expansion plans of the three large private companies, an industry expert points out.
Trai’s other recommendation of doing away with the cap for individual bands will be far more beneficial.
The Vodafone-Idea combine is expected to breach the cap in the 900Mhz band in some circles. Having a composite limit for all sub-1GHz bands will allow them to retain all of their spectrum holdings post-merger.
According to analysts at Deutsche Bank, the alternative under the existing rules was for the merged company to return excess spectrum worth Rs7,000 crore—Rs8,000 crore.
This recommendation will also help Reliance Jio in acquiring 800Mhz spectrum held by Reliance Communications Ltd (R-Com).
Currently, it uses some of the spectrum held by R-Com under spectrum sharing arrangements. The removal of the cap on individual bands will enable it to acquire this spectrum. The move is thus also a positive for R-Com, which is looking to raise funds through asset sales.
In the immediate term, the new rules don’t seem to have any benefit for Bharti Airtel, although Trai’s latest move fits well with the fast-emerging oligopolistic structure in the telecom industry.
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