Monday, May 31, 2010

>Telecom Regulatory Authority of India (Trai) has proposed new regulations for telecom service

Telecom Regulatory Authority of India (Trai) has proposed new regulations for telecom service providers with regard to the much awaited announcements on allocation of 2G spectrum charges, M&A guidelines, spectrum sharing/trading and universal license fee. The authority has prescribed a cap of 8 MHz for all service areas and 10 MHz in Delhi and Mumbai for GSM services. However, operators will have to shell out one-time fees for spectrum over the contractual limit of 6.2 MHz for GSM and 5 MHz for CDMA operators. Mergers and acquisitions
will be relaxed to make it easier for telcos to buy out one another as long as the combined entity does not command more than a 30% market share in revenue or subscriber terms. Trai has proposed to replace the 900 MHz band spectrum with 1800 MHz band spectrum at the time of renewal of license in order to re-use the former for 3G services. The regulator has expressed a desire to have uniform licenses fees across all telecom licenses and service areas. It has proposed to bring it to 6% by FY14 in a phased manner.

New Spectrum Management Policy – Spoilsport for incumbents According to the latest Trai recommendations, the amount of spectrum required in GSM is 6.2 MHz for most areas in the country, 8 MHz for districts having cities with a population of 1 million or more and 10 MHz for metro service areas of Delhi and Mumbai.

Similarly, for CDMA, not more than 5 MHz is required in the whole of the country except in metro service areas of Delhi and Mumbai where 6.25 MHz of spectrum will be required. Trai has suggested charging a one-time fee for holding 2G radio spectrum in excess of 6.2 MHz. The fee will be linked to the price of the ongoing auction of 3G spectrum. The worst affected companies will be Bharti Airtel, BSNL, Idea Cellular and Vodafone Essar. If the recommendations are implemented in the current form it would be hugely negative for the overall telecom industry. The overall outgo to the government on account of one-time spectrum fees could be to the tune of Rs 10,000 –12,000 crore.

However, it also said that 4.4 MHz of start-up spectrum that new entrants hold will be enhanced to 6.2 MHz for no additional cost, which favours new entrants.

The priority for granting spectrum would be:

a. Licensees who have received the initial start-up spectrum and met eligibility conditions for grant of additional spectrum up to 6.2/5 MHz will be given top priority. The inter-se priority for such operators, subject to meeting the eligibility norms, would be the date of application for additional spectrum

b. Licensees who have been assigned the committed spectrum but are waiting to get additional spectrum up to the maximum permissible limit will be next in priority.

To read the full report: TRAI