Trai may waive 3-yr lock-in to ring in consolidation

Likely To Ask Govt Not To Issue Fresh Licences

THE telecom regulator will unveil sweeping new rules that could strain the finances of some of India's top mobile phone companies and set the stage for consolidation in a crowded and ultra-competitive market. 

    In recommendations, due out on Tuesday, the Telecom Regulatory Authority of India, or Trai, will say that GSM operators with more than 6.2 MHz of 2G airwaves must pay a one-time fee to keep spectrum beyond this limit, those aware of the recommendations said. 
    If the Trai proposal is implemented, companies such as Bharti Airtel, Vodafone Essar, Idea Cellular and BSNL, all of which hold up to 10 MHz of radio frequencies in several circles, must pay hundreds of crores each. The fee will be linked to the price of 3G spectrum that is now being auctioned. 
    Rules governing 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. This will enable new entrants to sell out, as Trai will do away with a clause that prevents promoters of companies that acquired telecom licences in early 2008 from exiting their ventures for at least three years.
    Alleged irregularities in the allotment of 2G spectrum in 2008 are being investigated by CBI. Allocations of 2G frequencies have been put on hold since March 2009. 
    Future allocations of 2G airwaves will be benchmarked against the price of 3G spectrum and linked to rollouts by phone companies, instead of the current practice of providing them based on companies' customer base. But Trai also plans to ask the government to cap the allocation of 2G airwaves to all telecom companies at 8 MHz. Incumbents, who hold more than 8 MHz in certain circles, will be allowed to retain it after paying a one-time fee. 
    The regulator also plans to allow telcos to share spectrum, a move which will make India the first such nation to do so. 
REFORM CALL 
Future 2G allocations to be based on rollout, not subscribers Future 2G allocations to be priced, benchmarked against prices 3G airwaves fetch2G allocations to be capped at 8 MHz for all telcos Spectrum sharing to be allowed, but not trading Cap on number of telecom licences, no new licences to be issued due to spectrum crunch. Incumbents holding above 6.2 MHz to pay one-time fee for all extra airwaves 
One-time fee for airwaves beyond 6.2 MHz to be benchmarked against prices 3G airwaves fetch 
Licences to be renewed for 10 year periods when they expire 
Telcos to pay market price for renewing licences Trai may call for licence renewal 
EXISTINGrules make it almost impossible for consolidation, because a telecom company can't hold more than a 10% stake in another company that has operations in the same circle. Besides, telcos can't buy out their rivals that have operations in the same states, as current rules do not allow operators to have more than one licence in a circle, and a three-year lock-in also prevents promoters of companies that that acquired telecom licences in early 2008 from exiting their ventures. 
    ET has also learnt that Trai wants the government to extend the licences of all telecom companies by a decade when they come up for renewal within the next couple of years. But Trai wants them to pay market rates — value of the airwaves they hold — for the licence when they are renewed. Most telecom operators got their licences in the early 1990s for a 20-year period. 
    To facilitate consolidation, the regulator will say that in case any incumbent buys a new operator, the licence tenure of the latter will be applicable. 
    Trai will also change its earlier recommendations that said there should not be a cap on the number of companies that have been awarded telecom licences. With start-up 2G spectrum almost exhausted and limited to just a handful of circles, the regulator will ask the government not to issue any fresh telecom licences, killing the hopes of the more than 20 companies waiting to enter the world's fastest-growing telecom market.