NEW DELHI: The Telecom Commission (TC) has decided to relax spectrum holding caps, giving a boost to M&As and spectrum sale, as carriers try to sell assets, including airwaves, to repay debt.
The commission — the highest decision-making body in the communications ministry — on Tuesday 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, headed by telecom secretary Aruna Sundararajan, endorsed the Telecom Regulatory Authority of India’s proposal to do away with the 50% cap on intra-band spectrum holdings of telcos. 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 (sub-1GHz bands).
The TC 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.
JIO WILL BE THE MAIN GAINER: EXPERTS
A senior telecom department official said the proposals will be sent to the cabinet at the earliest. Current government rules bar any merged entity from holding more than 25% of the spectrum allocated in a service area or circle, and over 50% in a particular band.
The Vodafone-Idea merged entity stands to gain from the enhanced airwaves caps as the companies would not need to sell or return excess spectrum. “This will benefit customers, government and industry. India is already the largest mobile data market in the world and the consumption of data continues to grow,” Vodafone said in a statement.
Reliance Jio, too, could benefit as it will be able to mop up more airwaves in the 4G-ready 850 MHz band. Jio holds the maximum amount of airwaves in the 850 MHz band across all 22 circles, and the increased caps will give it the leeway to acquire more spectrum from Reliance Communications, which still has 70 MHz of the bandwidth. “The main gainer will be Jio, which will be on a spectrum hunt and has the muscle to back itself. Incumbents who have excess spectrum will have to protect their turf, which could lead to more borrowing costs for operators,” said Sanjiv Bhasin, executive V-P, markets and corporate affairs, at brokerage IIFL.
Bharti Airtel, the country’s largest telco, had opposed removing the 50% cap within a band. The company’s chairman Sunil Mittal, in an interview to ET, had said the move to remove the intra-band cap was designed to allow ‘one operator’ to hold more than 10 MHz in the lucrative 4G band of 850 MHz.
RELIEF FOR STRESSED TELCOS
A senior telecom department official said relaxation of spectrum caps would benefit stressed telcos. “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 telcos to pool resources and improve network efficiency. They will also result in greater demand for airwaves in future auctions. Rajan S Mathews, director-general of the Cellular Operators Association of India, said the move to increase the overall spectrum cap will facilitate M&As in the sector.
Mritunjay Kapur, head (technology, media and telecom), KPMG India, said more spectrum in the hands of an operator will eventually lead to improved customer experience.
The extension of the payments tenure and the reduction in interest rate on penalties had been proposed by the IMG set up to propose measures to alleviate stress in the telecom sector. This package has fallen short of the expectations of established telcos such as Airtel, Idea and Vodafone. Reliance Jio, on the other hand, had said there was no need for any relief package at all. Telcos are weighed under debt of around ?7.7 lakh crore. To ease the financial burden on operators, the TC had also sought legal opinion on whether profits from trading spectrum and not the amount of the full deal could be considered as part of the revenue generated by carriers.
The government takes a share of this revenue — called adjusted gross revenue (AGR) — through levies and fees.