(By Preethi J & Nikhil Pahwa)

Spectrum Trading Fee

India’s Department of Telecommunications is considering two very significant changes to the sector this year, report the Times of India and Economic Times. The DoT is reviewing the  Mergers & Acquisitions guidelines of April 2008 and has set up a special committee to re-evaluate spectrum pricing. Among the considerations is allowing transfer of spectrum from one Telecom Operator to another, and the institution of a transfer fee “to deter firms from trading in spectrum.”

Note that the ToI story refers to a DoT report, which we could not locate on their website, and quotes unnamed sources. In case you have a copy of the report, please do send it across.

Our Take

The way we see it – a transfer fee will only legitimize trading in spectrum. If the DoT really wants to prevent trading, they shouldn’t allow the transfer of spectrum. At the same time, a spectrum trading regime will provide some relief to new telecom operators like Unitech Wireless, MTS, S-Tel, among others.

It’s interesting to note what has the DoT done over the last year or so: They first put the subscriber linked allocation of spectrum into cold storage, which meant that the same amount of spectrum was available for operators, even though their subscriber numbers were growing, and the paucity of spectrum resulted in a decline in quality of service among telecom operators. Then additional licenses were sold, with guaranteed spectrum. New Telecom Operators have the spectrum, they’re now allowed to lease infrastructure from existing telecom operators for reducing rollout costs, and if this goes through, they can also monetize unutilized spectrum.

Therefore, instead of selling licenses, the DoT might as well set up a Telecom Trading Exchange, allowing registered telecom operators to buy and sell spectrum. The transfer fee will make sense then…a brokerage of sorts.

The Times of India also reports that the Telecom Regulatory Authority of India (TRAI) has ordered six of the New Telcos to open up their financial records for inspection: S-Tel, Datacom, Sistema Shyam (MTS), Swan Telecom, Loop and Unitech Wireless have submitted the changes in their equity structures to the regulator. Chennai-based S-Tel’s equity has multiplied by seven while two others have reported stunning growths of 439% and 135%. All seem to have sold stakes to foreign entities. And – remember – this is without many of them getting a single customer.