The Telecom Commission has accepted the Telecom Regulatory Authority of India?s (TRAI) proposal for allowing spectrum trading and sharing among operators. It has, however, asked the Department of Telecommunications (DoT) to issue the final guidelines on the matter after considering TRAI?s recommendations. The commission has also stated that the final guidelines should be incorporated in the spectrum trading document before the next auction takes place.
Spectrum trading has been a key demand of telecom operators like Bharti Airtel, Vodafone, Idea Cellular and Uninor. Keeping this in view, TRAI released its recommendations on ?Valuation and Reserve Price of Spectrum? in September 2013, which includes guidelines on spectrum trading and pricing. The recommendations include the following:
Spectrum trading
? Spectrum trading should be permitted in the country. Initially, only transfer of spectrum will be permitted.
? The eligibility conditions for spectrum trading and participating in the spectrum auctions should be the same.
? Only the spectrum that has been obtained through auction or for which the prescribed market value has been paid by the operator can be traded. This will also include spectrum in the 2100 MHz and 2300 MHz bands.
? The prescribed market value will be applicable on the spectrum being traded after adjusting the entry fee paid by the telecom service provider (TSP) for acquiring the spectrum (bundled with the licence) pro-rated for the remaining validity of the spectrum. After the first trade, the value of the spectrum traded shall be at par with the spectrum acquired through auction. The validity period of the spectrum will not change while trading.
? The seller and the purchaser will be required to inform the licensor about the spectrum trade for the purpose of updating the spectrum register. However, no permission will be required from the licensor/government. The spectrum register should be updated within a maximum time period of eight weeks from the date of the transaction.
? Trading transactions should be subject to a cap of 50 per cent of the spectrum in a band and 25 per cent of the total commercial spectrum assigned in a licence service area.
? In case a TSP wishes to trade its spectrum after completion of the roll-out obligations, it will be permitted to sell the spectrum in parts, subject to the minimum quantum of spectrum permitted for trading.
? However, in case the TSP does not fulfil its roll-out obligations, it will have to sell the entire spectrum and the obligations will also be transferred.
Spectrum reserve price and pricing
? There will be no reservation of spectrum for renewing licences in the 900 MHz and 1800 MHz bands. Also, no priority should be accorded to these licensees in the bidding process and all bidders will be treated alike.
? DoT should formulate a clear road map for spectrum pricing before the upcoming auction in the 1800 MHz band. It should indicate the quantum of spectrum available in the future along with timelines so that service providers whose licences are due for renewal in 2015/ 2016 can make an informed decision before bidding for spectrum.
? For auction of spectrum in the 1800 MHz band, the block size should be of 2×200 kHz each and an existing licensee will have to bid for a minimum of three blocks, while a new entrant will be required to bid for a minimum of 25 blocks.
? For the auction of spectrum in the 900 MHz band, the block size should be 2×1 MHz, with the condition that bidders will have to bid for a minimum of five blocks.
? The eligibility conditions prescribed in the recently held auctions (November 2012 and March 2013) will also be applicable for the upcoming auction.
? All licensees should have the same set of roll-out obligations and DoT should amend the licence conditions to incorporate the same.
? All villages with a population of more than 5,000 should be covered within five years of the effective date of allocation of spectrum, and villages with a population of over 2,000 must be covered within seven years.
? These amendments will be effective from April 1, 2014. However, in the case of TSPs that acquired universal access service licences before 2008, the time period for completing the additional roll-out obligations shall be two to four years from the effective date, while for TSPs that acquired licences after 2008, the time period shall be five to seven years.
? In case more than one set of market-determined prices are available, the latest market-determined prices available at the time when the TSP wants to liberalise its spectrum holding should be applied.
? If the market-determined prices are more than a year old, these prices have to be suitably adjusted to reflect the prevailing market conditions.
? The auction in the 800 MHz band should not be carried out at present. Hence, there is no need for determining a valuation or corresponding reserve price for 800 MHz spectrum.
? Payment terms should be structured by the government and must address the financing issues of the bidders participating in the proposed auction.
? All spectrum allocated through the auction process should henceforth be charged at a flat rate. Spectrum that has already been acquired through auction or trading or for which a TSP has paid the prescribed market value to the government should not be added to any existing spectrum holdings for determining the applicable slab rate. This will also apply to spectrum allocated in the auctions held in November 2012 and March 2013.
? The spectrum usage charge (SUC) will be the same for Reliance Jio Infocomm (4G operator), Airtel (GSM operator) and Sistema Shyam TeleServices limited (CDMA operator). The SUC for all auctioned spectrum should be charged at a flat rate of 3 per cent of the adjusted gross revenue of wireless services. This will come into effect from April 1, 2014.
Earlier in October 2013, the Telecom Commission met an inter-ministerial panel to seek additional information and clarifications on TRAI?s recommendations before the third round of auctions commenced. The panel has given in-principle approval on spectrum trading. However, DoT took a contrary view on the subject and stated that the telecom industry was not in a position to support the concept of spectrum trading. It also rejected TRAI?s recommendation to have a uniform SUC of 3 per cent. Despite these reservations, the Telecom Commission has approved spectrum trading among operators, which is a positive move for the industry.
The Cellular Operators Association of India (COAI) has asked DoT to allow spectrum trading under the proposed merger and acquisition (M&A) policy for the industry. It has also requested that trading transactions be subject to a spectrum cap of 25 per cent of the total commercial spectrum assigned as against the existing 10 per cent. Besides, COAI has pointed out that sharing should be allowed as spectrum is technology neutral.
The Planning Commission has also lent its support for allowing spectrum trading amongst players as it will ensure efficient use of spectrum. The commission has argued that TRAI?s recommendations must be viewed as a package covering spectrum trading, M&A guidelines, spectrum sharing, a flat regime for SUC and a level playing field for roll-out obligations for all service providers. It has also argued that DoT needs to consider these issues within the framework of the National Telecom Policy, 2012, well before auctions in the 1,800 MHz and 900 MHz bands are held.
Apart from M&A, the Planning Commission also views spectrum trading as a way to promote consolidation in the sector and encourage operators to optimally use spectrum as well as overcome the inefficiencies that arise after the initial allocation.
TRAI is expected to revert to DoT on the clarifications sought before end-October. The commission?s decision will then be placed before the empowered group of ministers for final discussions related to the third round of auctions, which are expected to be conducted in January 2014.
