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Union Cabinet approves higher spectrum holding cap for telcos

The Union Cabinet has approved increasing the cap on spectrum that a telecom operator can hold to 35% from the earlier 25%. Revising the limit will facilitate the consolidation of telecom licensees and may encourage the participation in the future auction, the government said in a statement.

Restructuring the deferred payment liabilities of spectrum auction has also been approved. Telcos now have a one-time opportunity to opt for a higher number of instalments—16, at most—to make payments, instead of the usual 10 instalments. This will essentially mean that companies will get 16 years to pay for airwaves. According to the government, it is set to receive over Rs 74,446 crore by 2034-35 as payments for spectrums.

These recommendations were earlier endorsed by the Telecom Commission. The commission had also recommended lowering interest rate on penalties on outstanding dues of telcos from 14% to 12%, but it is not clear if the cabinet has approved it.

With respect to spectrum holding, while the intra-band cap is removed, a combined cap of 50% is placed on holding sub-1 GHz bands (700 MHz, 800 MHz and 900 MHz bands). At the same time, there is no cap for holding spectrum above 1 GHz band.

The Telecom Regulatory Authority of India (TRAI) had recommended revision of these caps taking into account technological advancement and efficient use of spectrum. However, the government said that revised limits may be revisited after Final Acts of World Radiocommunication Conference (WRC) in 2019.

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Implications

The Cellular Operators Association of India (COAI) has welcomed the move, as its director Rajan Mathews told Reuters that spectrum caps will help the consolidation process and debt extension will give some immediate cash flow relief. But he added that the sector was still grappling with excessive levies and taxes.

The telecom industry has changed drastically since the entry of Jio in 2016, as smaller players have run into financial trouble (the latest being Aircel) and the sector has consolidated. The increase in the cap for spectrum holding will allow trading of bands and ease the process of consolidation. It will also enable companies to pool resources and improve network efficiency.

Reportedly, Reliance Jio stands to benefit from the new rules 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.

Further, 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.

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