In a move that will boost mergers and acquisitions, telecom regulator TRAI today recommended doing away with caps on spectrum holding in individual bands, and also mooted relaxing the overall ceiling. The Telecom Regulatory Authority of India (TRAI), in its recommendation to the government, said the current limit allowing an operator to hold up to 50 per cent of the total spectrum available within a band in a zone should be removed.
It has also suggested raising the limit for overall holding across all bands to 35 per cent from 25 per cent. For sub-1 GigaHertz bands (that is 700 Mhz, 800 Mhz, 900 MHz bands known for their optimal coverage), it suggested that the combined spectrum holding limit be set at 50 per cent. The recommendations, if accepted by the telecom department, would provide a major relief for the soon-to-be-merged Idea Cellular and Vodafone which are teaming up to create India’s biggest mobile phone operator ahead of current market leader Bharti Airtel.
It would also facilitate acquisition of spectrum of Reliance Communications (which has announced shutting down of 2G and 3G services) by suitors like Reliance Jio. These deals have been hindered by the present caps on spectrum holding. “Mergers and acquisition guidelines allow holding 50 per cent of market share in terms of subscriber base as well as revenue. Therefore, 25 per cent cap on overall spectrum holding may put constraints on the ongoing consolidation phase,” TRAI said in its 25-page recommendation to the government.
The present caps, it said, can also restrict the capability to purchase additional spectrum in future auctions. “Any constraint due to spectrum cap may dampen the demand prospects in future auctions. Therefore, the Authority is of the view that the overall spectrum cap should be revised,” it said arguing in favour of raising the overall spectrum ceiling from the current 25 per cent to 35 per cent.
The telecom department had sought TRAI’s views on whether the current norms should continue or need review. This was done after an inter-ministerial group – constituted to look into the financial health of the sector – recommended that the said matter be referred to the regulator. The telecom regulator, in turn, sought the views of the operators before coming out with its recommendations.
Explaining the rationale behind its recommendations for easing the spectrum norms, TRAI has said that the 25 per cent cap was imposed at a time when there were 6-10 operators in a given telecom circle. After the ongoing consolidation in the sector, the number of players in a service area has come down. Besides, the service providers are also free to use any technology of their choice in any band or using multiple bands.
“As LTE (Long term Evolution) device ecosystem is evolving in each of the spectrum band, there is no real need to put spectrum cap in each spectrum band,” the regulator said. But imposing a cap in the sub-1GHz band was important as these are “most optimal bands”, TRAI argued. “Therefore, spectrum in sub-1GHz range viz 700 MHz, 800 MHz and 900 MHz should be treated separately and special provisions have to be made to safeguard against creation of monopoly,” TRAI said.