New Delhi, Jan. 29: The ultimate bundled offer in the world of mobile telephony — a telecom licence entwined with a band of free radio waves — is about to be ripped up.

The government has finally decided to de-link a 2G telecom licence from free start-up spectrum, abandoning a 16-year-old practice that was put in place when private players were first allowed to offer wireless phone services.

At present, a second generation, or 2G, telecom licence comes with the offer of 4.4 MHz of free start-up spectrum to roll out services. Telecom companies are awarded an additional 1.8 MHz of 2G airwaves if they add a pre-defined number of subscribers.

Under the current rules, the telecom player must have a minimum subscriber base of 15 lakh to be eligible for 6.2 Mhz of spectrum.

Spectrum — or radiowaves over which wireless services like mobile telephony are provided – will now be sold at market rates.

“New licences issued to telecom companies will be in the nature of a unified licence and it will not come with any contractual start-up 2G spectrum,” telecom minister Kapil Sibal told reporters here today.

Telecom service providers will have to buy a unified or general licence to offer GSM, CDMA, 2G, 3G, landline or Internet services by paying a licence fee.

Officials said spectrum is likely to be auctioned from now on and service providers will have to bid for the scarce commodity.

In August 2007, telecom regulator Trai had recommended that spectrum allocation be de-linked from a telecom licence.

The decision to “unbundle” the licence and spectrum comes in the wake of the controversial sale of 122 telecom licences in January 2008 by then telecom minister Andimuthu Raja to a group of cherry-picked players at 2001 prices.

The Comptroller and Auditor General (CAG) had slammed Raja for causing a loss of Rs 1.76 lakh crore to the exchequer by spurning suggestions to auction the licences.

The CAG estimate was based on the 3G auctions held in April last year. Critics questioned the assumptions made by the CAG while drawing up the estimate but Raja was forced to resign because of the political storm that the report had triggered.

Sibal, who took over in November from Raja, is in the process of drafting a new telecom policy.

Under the new rules, the existing service providers — Bharti Airtel, Vodafone, Reliance, Tata and state-owned BSNL and MTNL — would have to pay for spectrum beyond 6.2 MHz. Most of these operators hold between 8 and10 MHz of 2G spectrum in most of the country’s 22 circles.

“We need to seriously consider the adoption of an auction process for the allocation and pricing of spectrum beyond 6.2 MHz while ensuring that there is adequate competition in the auction process,” Sibal said.

The new telecom players who were granted licences and 4.4 MHz of spectrum in 2008 have already come under the scanner. Most of them have received notices that have threatened to cancel their licences — either because they were not eligible to receive them or because they slipped up on deadlines to roll out services.

“After this process is complete, if some of these licences are found to be valid, they will be given additional contractual spectrum of 1.8 MHz at the market determined rates,” said Sibal. This clearly means implies they will not automatically get another 1.8 MHz of spectrum free of cost.

The department of telecom (DoT) was supposed to grant up to 6.2 MHz of radiowaves to all the eligible players under the 2008 licence conditions. However, the government was authorised to decide the pricing of the additional 1.8 MHz at a later stage.

The minister said the DoT was awaiting telecom regulator Trai’s recommendations on market-led pricing mechanism of 2G spectrum and the mergers and acquisition policy before finalising the New Telecom Policy (NTP) 2011.

Industry experts said the new telecom operators, who are already burdened with rollout costs, would find it hard to bear the cost of the additional 1.8 MHz of spectrum.

However, the existing service providers would also be saddled with a hefty cost burden since many of them hold about 3.8 MHz of spectrum above the base limit of 6.2 MHz that has been set for the older players.

There would also be a uniform rate of revenue share to be paid by the operators as spectrum charge to the government under NTP 2011.

Under existing rules, operators pay between two and six per cent of their adjusted gross revenue (AGR) to the government as spectrum usage charge, depending on the amount of spectrum each operator has in the circles where it operates.

The telecom has ministry has started discussions with the department of space, ministry of defence, ministry of information and broadcasting and other public sector undertakings in an effort to free up more spectrum for civilian use.

Sibal added that the purpose of creating a new policy regime was to ensure that while subscriber tariffs remained low, industry continued to achieve robust growth and revenues flowed into the government ' s coffers.