Ahead of the 2G spectrum auctions, the Telecom Regulatory Authority of India (TRAI) has released (pdf) its final recommendations on spectrum trading guidelines, which allows telcos to buy or sell spectrum.

The organization notes (pdf) that this recommendations were formulated after analyzing the draft guidelines submitted by the Steering committee which comprised of senior TRAI officers and representatives from various telcos like Airtel, BSNL, Aircel, Idea, Vodafone, Reliance Jio, RCOM and others.

TRAI has earlier recommended that mobile operators should be allowed to trade spectrum bought through auctions, to which the Department of Telecommunications (DoT) had provided its in-principle approval in October 2013 and had requested TRAI to provide recommendations to issue detailed guidelines.

These guidelines are expected to allow major telcos acquire more spectrum in the country while providing an exit route to struggling telcos. Telecom secretary M F Farooqui told PTI yesterday that the government also plans to release the much-awaited merger and acquisition guidelines next week.

TRAI Recommendations

– Only Outright Transfer Of Spectrum Permitted: TRAI has proposed permitting only outright transfer of spectrum i.e. the ownership should be transferred to the buyer. Spectrum trading should not alter the original validity period of the allotted spectrum.

All pending dues of the seller will lie with them till the transfer date and will be transferred to the buyer after the trade has been done.

No Spectrum Leasing: Spectrum leasing should not be permitted right now and spectrum trading should be permitted only on the full licensed service area i.e. spectrum cannot be traded for a part of the licensed service area. In case the seller’s assigned spectrum is restricted by the licensor (DoT) due to non-availability, the rights and obligations of the seller for the remaining service area will also be transferred to the buyer when the spectrum becomes available.

– Seller is free to choose any route (tender, auction etc) to find a prospective buyer. However both the seller and buyer should inform DoT about the spectrum trade six weeks before the effective date. They will not need any permission from DoT or the government for this purpose.

TRAI has proposed a non-refundable transfer fee of one percent of the transaction amount or the prescribed market price (whichever is higher), which should be paid by the buyer to the government at the time of intimation.

Net Worth: Only CMTS/UASL/UL (AS)/UL licensees should be allowed to participate in spectrum trading and the buyer should have a net worth of Rs 100 crore for each service area besides Jammu & Kashmir and North East areas where the net worth should be Rs 50 crore. They should also have a minimum paid up capital equal to 10% of the minimum net worth and it should be maintained until the validity period of the right to use spectrum.

TRAI notes that licensees will not be allowed to trade spectrum if it is found in breach of the terms and conditions and DoT had ordered the revocation and termination of the license.

Allowed Bands & Block sizes: Spectrum Trading will be allowed in all spectrum bands marked by DoT for access services i.e. 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz spectrum bands. However, service providers can trade only those spectrum which has either been assigned through an auction in 2010 (or later) or they have already paid the market value to the government.

TRAI has recommended the following block sizes for spectrum trading:

– 800MHz band : 2 x 1.25MHz
– 900MHz band: 2 x 200MHz KHz
– 1800MHz band: 2 x 200MHz KHZ
– 2100MHz band: 2 x 5MHz
– 2300MHz band: 20 MHz in TDD
– 2500MHz band: 20 MHz in TDD and 2×10 in FDD

Spectrum Cap: Buyers should comply with the 25% spectrum cap on the total spectrum assigned in each band with applicable paired band put together and 50% cap within a given band in each of the service area. TRAI noted that spectrum being acquired through trading will be included in the total assigned spectrum while calculating the spectrum cap.

– TRAI has also recommended a two years lock-in period from the effective transfer date, for buyers to trade any spectrum in the same frequency band in which it had acquired spectrum through trading.

– Seller should clear its spectrum usage charges and pending payment installments till the effective trade date.

– Buyers should acquire a wireless operating license or get it amended from DoT’s Wireless Planning & Coordination Wing (WPC) before using the acquired spectrum. WPC will have two weeks to raise any objections and operators will have a similar time limit to respond to these objections.