In a move that could significantly help improve the business environment in the financially stressed telecom industry, the Telecom Regulatory Authority of India (TRAI) has released its recommendations on enhancing the ease-of-doing telecom business. The recommendations follow a suo motu consultation paper issued by the regulator in March 2017, with a view to review the existing processes and identify the bottlenecks, obstacles or hindrances in doing telecom business, and thus call for regulatory intervention.

In its recommendations submitted to the Department of Telecommunications (DoT), TRAI has proposed faster and time-bound approval of merger and acquisition (M&A) deals, more options for conforming to spectrum holding limits post a merger, and streamlining of the penalty levying process. In addition, the regulator has recommended taking the entire process of site clearances online, and setting a specified time frame for the issuance of licences for importing radio equipment from overseas and demonstrating new equipment or experimenting with new technologies such as 5G and internet of things.

Key issues and recommendations

  • Transfer/Merger of licences: The M&A guidelines issued in February 2014 do not specifically prescribe timelines for granting approval to transactions, pursuant to approval from the high courts/National Company Law Tribunal (NCLT). Further, as per the guidelines, if, as a result of a merger, the total spectrum held by the merged entity is beyond the limits prescribed, the excess spectrum must be surrendered within a year of the permission being granted. There is no provision for reducing the spectrum holding through spectrum trading. To address these concerns, TRAI has recommended that DoT should specify a definite timeline, not exceeding 30 days post the NCLT approval, for granting app­ro­val for the transfer/merger of licences by the licensor. Further, if the merger results in excess spectrum holding beyond the permissible spectrum cap, the resultant entity should be given the option to either surrender or trade its spectrum holding within the stipulated period of one year.
  • Trading of access spectrum: Till the auctions held in 2015, the permissible block sizes in different spectrum bands for trading of spectrum were exactly the same as those prescribed in the notice inviting tender (NIT) to acquire the spectrum through auctions. However, in the auctions held in 2016, block sizes in the 2300 MHz and 2500 MHz bands were reduced from 20 MHz (unpaired) to 10 MHz (unpaired). Given that there is a possibility of further change in block sizes and new spectrum bands are likely to be introduced in future auctions, TRAI has recommended that the permissible block size for trading in a band should be the same as specified in the NIT for the latest auction held and the spectrum trading guidelines should be amended accordingly. The regulator has also recommended that spectrum trading should be permitted in all the access spectrum bands that have been put to auction.
  • Financial penalty structure: Under the present licence conditions, the penalty imposed per violation in a service area ranges from Rs 1 million to Rs 500 million. Although the prescribed amounts are the ceilings, in the absence of any laid-down guidelines, the maximum penalty is often imposed on service providers, even if the violations are mi­nor in nature. In light of this, TRAI has recommended that DoT should de­vise a suitable matrix, linking the penalty to the severity of the incident and recurrence of the violation for the im­­position of financial penalties.
  • Net worth requirement for migration from UASL to UL: There is currently no clarity on whether a unified access service licence (UASL) holder who wants to migrate to the unified licence (UL) regime has to fulfil the net worth requirement as stipulated in the case of the latter. TRAI is of the view that for an existing service provider, the condition of minimum net worth should not be applicable for renewal or migration of its licence to UL.
  • EMF compliance and certification: Ac­c­ording to TRAI, consequent to the implementation of Tarang Sanchar, a web portal that contains the complete collated technical details of electromagnetic frequency (EMF) radiations of base transceiver stations (BTSs) across the country, including all technologies (2G/3G/4G) and all operators, DoT may review the need to submit revised certification by all operators for every upgrade of BTS on a shared site and biennial certification for all existing sites.
  • Bank guarantee: Currently, the entire sum of the performance bank guarantee (PBG), which successful bidders are required to submit in any auction, is held by the chief controller of accounts (CCA) till the completion of all the roll-out phases. In this regard, TRAI has recommended that the PBG for a particular phase of roll-out obligations should be released after successful certification by the Telecom Enforcement, Resource and Monitoring (TERM) cells. Further, if a TERM cell fails to submit its report within 12 months after the date of offer, the PBG should not be held back on account of pendency of testing. Further­more, DoT should review the process adopted by the CCA for the refund of bank guarantee and should ensure that the CCA does not take more than 30 days for the release of the bank guarantee.
  • Fee for testing of roll-out obligations: DoT has mandated that a service pro­vider should submit self-certificates of the required number of district headquarters (DHQs)/block headquarters (BHQs)/short-distance charging areas (SDCAs) for the fulfilment of spectrum roll-out obligations. Further, the TERM cells are required to carry out sam­ple testing of 10 per cent of such self-certified DHQs/BHQs/SDCAs. How­­­ever, as per industry stakeholders, the testing fees collected by the TERM cells is not confined to only 10 per cent of the self-certified sites that are actually audited, but is taken for the total number of sites. Moreover, the mobile switching centre (MSC) test fee, which is a major portion of the total testing fee, is charged in each roll-out testing, al­though the same MSC caters to a number of DHQs/BHQs/towns. In this regard, TRAI has recommended that the operators should be charged a test fee only for the DHQs/BHQs/SDCAs that are actually tested by TERM cells. Further, the regulator has suggested that the structure of the testing fee should be rationalised in order to avoid double payment for testing the same MSC.
  • Import licence for wireless equipment: As per the current regulations, service providers are required to obtain an import licence from the Wireless Plan­ning and Coordination (WPC) wing of DoT every time they import radio frequency (RF) equipment. Fur­ther, the licensees are allowed to procure only licensed service area (LSA)-specific import licences and require additional permissions for the deployment of the respective equipment in other LSAs. Since the procedures involved act as a hindrance for the timely procurement/ deployment of equipment, TRAI has recommended that there should be a defined timeline, not exceeding 30 days, within which an import licence should be granted. Further, as per TRAI, operators should be allowed to reinstall/deploy their wireless equipment in another LSA after giving prior intimation to the WPC wing, preferably through the online portal. There should not be any requirement of taking prior permission of the WPC wing for this purpose.
  • WPC clearance for demonstration li­cen­­ces and experimental licences: The overall time involved in obtaining a demonstration licence from the WPC wing for exhibitions, events and customer trials is around five to six weeks. Similarly, in the case of an experimental licence, which is required in respect of devices used in experiments and testing, the WPC ap­p­roval process takes six to nine months for an experimental licence for three months, which is extendable for another three months. Post that, the companies have to undergo a similar application process with long lead times. To address this issue, TRAI has recommended that applications for demonstration licences and experimental licences should be pro­cessed and the licence should be granted within a maximum period of 15 days and 30 days respectively. Further, the regulator has proposed that the validity period of the experimental licence should initially be six months, extendable by an­other six months.

Industry response

TRAI’s recommendations come at a time when the industry is witnessing a severe financial crisis, with most operators reporting a considerable dip in their revenues and profitability. In this context, the industry feels that the regulator’s recommendations, if approved, would improve the business environment in the country and lend clarity on a policy level. Spe­cifically, the suggestions will help weaker players to exit the market and stronger players to further strengthen their play. According to Rajan S. Mathews, director general, Cellular Operators Association of India, the new rules will significantly ease M&A processes, improve normal operations of telecom service providers and help the industry move forward.  “At a time when the industry is financially distressed and needs all the help it can get from the government, these recommendations come as a breath of fresh air. A lot more is needed, but this is a great start and the industry whole-heartedly welcomes these, and compliments the regulator,” says Mathews.

Puneet Kumar Arora