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Telecom commission approves relaxation of spectrum holding caps

Spectrum

The Telecom Commission approved the relaxation of spectrum holding caps for mobile companies on Tuesday. This is expected to give a boost to mergers and acquisitions and spectrum sales, as carriers try to sell airwaves to repay debt.

The commission, headed by telecom secretary Aruna Sundararajan, endorsed the Telecom Regulatory Authority of India’s (TRAI) proposal to drop the 50% cap on intra-band spectrum holdings of telecom providers. Instead, the TC agreed to impose a separate 50% cap on the combined spectrum holdings in the 700 MHz, 800 MHz and 900 MHz bands.

The commission also extended the payments tenure for auctioned airwaves from 12 years to 16 years and lowered the interest rate on penalties on outstanding dues of telcos from 14% to 12%.

The commission also backed TRAI’s suggestion to increase the overall airwaves holding limit to 35% from 25%. The changes in spectrum holding caps as well as in the payments tenure will have to be approved by the cabinet.

Current government rules bar any merged entity from holding more than 25% of the spectrum allocated to a service area or circle, and over 50% in a particular band.

Jio and Vodafone stand to benefit

According to an Economic Times report, Reliance Jio, stands to benefit the most as it will be able to grab more airwaves in the 4G-ready 850 MHz band. Jio holds the most amount of airwaves in the 850 MHz band across all 22 circles, the increased caps will give it the leeway to acquire more spectrum from Reliance Communications.

The report also mentions that Vodafone-Idea merged entity stands to gain from the enhanced airwaves caps too as the companies would not need to sell or return excess spectrum.

The nation’s largest telecom provider Airtel in November had opposed relaxation of the cap from the present 50%, saying this would ensure no telecom player is able to create a monopoly.

The ET report quotes a senior telecom department official saying that ther relaxation of spectrum caps would benefit stressed telecom providers. “The only way out (for a stressed telco) is merger and consolidation, for which spectrum caps relaxation is absolutely essential. The other option of surrendering spectrum was not recommended by IMG (Inter-Ministerial Group),” said the official.

The official added that the enhanced caps will also enable companies to pool resources and improve network efficiency. They will also result in greater demand for airwaves in future auctions.

Increase in budget for defence communications

The Hindu Business Line reported that the commission also approved increasing the budget for the Network for Spectrum (NFS) project. The NFS is a dedicated communications network that the Department of Telecommunications (DoT) is setting up for the defence forces.

Earlier, the commission had asked for a separate committee to be formed, to look into the estimates and cost escalation for the project. Following this, representatives from the Department of Economic Affairs (DEA), the Department of Industrial Policy and Promotion (DIPP) and Niti Aayog along with DoT gave their recommendations.

The commission has accepted the recommendations. “The total cost has been revised from ₹11,330 crore to ₹24,664 crore now,” an official told the paper.

State-run BSNL will be the implementing agency for NFS.

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