New telecom policy brings uniform licence, 2G spectrum sharing

India announced a uniform telecom licence fee policy under the new telecom policy on Wednesday. Telecom minister Kapil Sibal announced that the telecom regulator will announce a migration path for existing licence holders to the uniform licence regime. 

"All future licences wold be unified and telecom spectrum in each city for operators would be alloted separately," telecom minister said. 

The government also permitted telecom operators to share 2G spectrum. This means they can now pool, share and trade in it to efficiently utilise the spectrum which is a scarce resource. Spectrum sharing is permitted in the same service area. The permission for sharing will be given for 5 years.

The policy does not provide for spectrum sharing among those holding 3G spectrum.

The new policy does away with the previous licence policy of allocating the spectrum to telecom companies in various telecom circles based on regions. This means companies like Vodafone or Bharti Airtel had to acquire different licences to operate in different cities across India. Going forward, they can pay a migration fee and acquire a national uniform licence.

The telecom policy also lays down rules for mergers and acquisitions between various players. This is important because 80 per cent of the mobile phone subscribers are controlled by 4-5 national telecom players. Since India had divided the nation into different telecom circles, it was not possible to merge telecom businesses. With a single nationwide licence, mobile operators can exit through M&A.

The policy says that any potential merger planned between two operators would be evaluated on two criteria. These include subscriber base and revenue. Consolidation up to 35 per cent market would permitted. Sibal said that the government will take a decision on accepting the Telecom Regulatory Authority recommendation of allowing M&A up to 60 per cent market share later. This means, two top companies can consolidate through merger into a single entity that controls a 60 per cent market share. 

The announcement assumes significance after the Supreme Court verdict that set aside the allocation of 122 licences issued in 2008. Sibal said that the government was still examining implications of the verdict.

Two of India's largest mobile services providers, Vodafone India and Bharti Aittel, welcomed the government's new telecom policy, particularly the uniform licence fee and spectrum auction.

“Vodafone welcomes the introduction of a uniform licence fee across all telecom licenses and service areas regime starting from April 2012; this has been a long standing request of the industry," the UK-based company said.

Meanwhile, Airtel said that allowing sharing of spectrum is a step in the right direction.

"The government should also consider allowing spectrum sharing in all the bands. However, the higher spectrum usage charge, which is applied on the total spectrum held by both the operators, will act as a deterrent to sharing. We hope the government will review this," Airtel said.

Highlights of the new telecom policy:

* The new policy to have uniform license fee across telecom sector

* TRAI to recommend migration path for telecom companies

* All future licenses will be unified licenses

* Telecom spectrum to be allotted separately

* Govertnment sets rules for mergers and acquisition between telecom companies

* There will be an entry charge for migration to the unified licence

* Licences to be renewed for 10 years after expiry

* Licence fee will be implemented in FY13 for 2 years

* Uniform license fee up to 8 per cent of adjusted gross revenue of the telecom company

Tags: FY13, Govertnment, India, Kapil Sibal, New Telecom Policy, Sibal, Supreme Court, Telecom, Uniform, Wednesday