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Telcos may be allowed to have up to 60% share in licensing area

Telcos may be allowed to have up to 60% share in licensing area
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First Published: Thu, Nov 03 2011. 10 48 PM IST

Updated: Thu, Nov 03 2011. 10 48 PM IST
New Delhi: The telecom regulator has recommended that a telecom operator can have as much as a 60% market share in terms of revenue and subscribers in a licencing area after it acquires a rival, double its earlier proposal.
If an entity born out of a merger or acquisition has a 35-60% market share, the deal will be examined for market dominance issues. The government will not examine entities with a market share below 35%. Acquisitions that are likely to result in entities with a market share of more than 60% will not be considered.
The Telecom Regulatory Authority of India’s (Trai) recommendations came in a reply to the department of telecommunications, which had sought clarifications on the earlier proposal made in May 2010.
“Allowing spectrum sharing and the spectrum refarming policies they have suggested, as well as increasing market share limit for mergers and acquisitions, are all steps in the right direction,” said Prashant Singhal, telecom industry leader at Ernst and Young. “However, the limiting of spectrum to 25% of that available in an operating area could lead to some companies deciding against consolidation.”
The regulator has suggested there be no cap on the quantum of spectrum held by an operator as long as it is less than 25% of the spectrum available in that specific licencing area or circle.
“The prescribed limit of spectrum pertains only to the assignment by the government of spectrum to a licensee and does not preclude a licensee from acquiring additional spectrum by way of auction or through mergers,” R.K. Arnold, Trai secretary, said in the letter to the telecom department.
For the priority of spectrum allocation issue, Trai has allowed special consideration to some telecom operators because of court orders and to those given spectrum in parts of a circle and not the entire operating area.
The regulator reiterated its recommendations on a uniform licence fee of 6%. However, for infrastructure providers and Internet service providers’ licences, which are being brought under the licence fee regime, Trai has suggested the fee be 3% initially and be increased to 6% by 2015-16.
It has also permitted spectrum sharing up to the spectrum limit of the merged entities for a period of five years and subject to an extension of another five years.
“Spectrum sharing would help operators facing shortage of spectrum to decongest their networks with help from operators with spare capacity, leading to an efficient and effective use of scarce national resource,” said Hemant Joshi, partner, Deloitte Haskins and Sells.
In a move that could increase tariffs, Trai stood by its earlier recommendation to increase the price of second-generation (2G) spectrum by six times. Many older operators who are reaching their licence renewal date in the next three-five years may have to pay as much as Rs 10,972.45 crore for acquiring start-up 2G spectrum, compared with Rs 1,658 crore paid earlier.
On the issue of one-time charge for additional spectrum beyond the contracted limit of 6.2MHz, Trai left it to the government to take a decision.
Earlier this year, Trai had said each MHz of additional spectrum after the 6.2MHz limit held by operators should cost a one-time charge of Rs 4,571.87 crore (all-India). This would vary from circle to circle, and operators would have to pay only for those circles in which they hold extra spectrum.
All licensees would have to pay for spectrum at the current price at the time of renewal of licences, or at a price to be discovered through auction or any other market-driven mechanism, according to Trai recommendations.
Trai also said the price of spectrum in the 800Mhz and 900Mhz bands would be 1.5 times of the price of 1,800Mhz band spectrum.
On exit policy, Trai said it will initiate a consultation process and forward its recommendations to the government in due course.
Trai has suggested that a separate spectrum refarming fund be created to ensure timely availability of spectrum in the country. The regulator is also initiating a consultation on refarming spectrum, which will look into the feasibility of disallowing operators with spectrum in the 900Mhz band from participating in an auction for spectrum in the 700Mhz band.
PTI contributed to this story.
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First Published: Thu, Nov 03 2011. 10 48 PM IST