Tough option for spectrum renewal

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By JAYANTA ROY CHOWDHURY
  • Published 11.11.13
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New Delhi, Nov. 10: Telecom players may not get the opportunity of reservation, or automatic renewal, of spectrum when their licences come up for renewal.

The Telecom Commission in its meeting last week had re-affirmed the regulator's position on this, and the department of telecom (DoT) will now put forward the proposal before an empowered group of ministers.

Leading players Bharti Airtel and Vodafone — whose licences come up for renewal in 2014 — will have to vacate the spectrum and get it back only through the competitive bidding route.

In a note prepared after the commission’s meeting on November 6, the government said with respect to the renewal of spectrum in the 900MW and 1800MW bands the telecom watchdog Trai had “reiterated its earlier recommendation against any reservation or priority to renewal (of) licences. The Telecom Commission noted the same and decided the recommendation be placed before the EGoM”.

Officials said the department felt an auction instead of reservation, or an automatic renewal, was more fair.

However, Airtel and Vodafone are expected to go to court if they are forced to give up their lucrative spectrum in the 900MHz band in Delhi, Mumbai and Calcutta.

Delhi and Mumbai have 22.2MHz each and Calcutta has 20.2MHz in the 900MHz band.

Vodafone and Airtel have 8MHz each in Delhi; Vodafone and Loop Telecom hold 8MHz each in Mumbai, while Bharti has 6.2MHz; in Calcutta, Bharti and BSNL have 6.2MHz each, while Vodafone holds 7.8MHz.

The telecom department has also decided to forward another recommendation which states that if any merger or acquisition happens before a three-year lock-in period, the new company will have to pay a fee based on the money paid for the sale or the merger.

This differs from the draft M&A rule, recently released by the Telecom Commission, which had dropped the lock-in clause.

Officials said the lock-ins would be scrapped for future deals. But those who were given spectrum in the past with a lock-in period will have to pay the fee. The provision had been brought to stop companies from buying spectrum at a fixed price from the government and then sell it.

“In case a merger or acquisition is proposed before the lock-in period of three-years, detailed guidelines may be evolved for levying a charge on the resultant entity based on the valuation of the transaction,” said a note signed by the secretary of the Telecom Commission and additional secretary, department of telecom, and circulated to the Planning Commission, finance and industry ministries.

Top telecom ministry officials said Sistema, Singtel (which holds 32 per cent in Bharti Airtel), Vodafone and Telenor were believed to have been waiting for new M&A norms before committing fresh investments.

India expects to implement the new M&A norms soon, allowing firms to merge or buy out smaller players, provided the combined market share of the company does not exceed 50 per cent in a circle.

Officials said individual telecom companies should also not breach the 25 per cent cap in any circle for GSM air waves or a cap of 10MHz for CDMA spectrum.