In a policy reversal, the government plans to cap the number of telecom operators in each circle to meet the twin objectives of tiding over the spectrum crunch and enhancing the subscriber base through optimal utilisation of spectrum.
Though the current policy regime supports entry of any number of operators, last year, seeing a rush of new applications, the department of telecommunications (DoT) put a temporary cut-off date of October 1, 2007 through an administrative order, for accepting new applications. This has not been lifted as yet. Further, only applications submitted till September 25, 2007 have been accorded licences till date, with DoT still undecided on the rest.
If DoT finally caps the number of operators in circles, it would be against the Telecom Regulatory Authority of India?s (Trai) recommendation last year to the contrary. However, since it is a policy matter, the government has the powers to tell the regulator to revisit the recommendations.
Official sources told FE , ?the need for capping has arisen because no way can we provide spectrum to each operator so that it can support the maximum number of subscribers efficiently. What we are looking at is encouraging more consolidation in the sector. Of course, this would entail a series of drastic changes in the current policy, including the mergers and acquisition guidelines, which needs to be altered to facilitate consolidation?.
Officials said the Indian market is now mature enough to allow sufficient competition between a few players, and allowing an excess number of operators would only reduce spectrum efficiency, thereby, reducing the number of subscribers than otherwise would be. ?Spectrum is a very scarce resource and there is only a limited amount we can offer to telecom operators. Hence, we need to optimise on it. Secondly, India has already become the market with the lowest average revenue per user or ARPU and it is a display of the competitive edge we have attained?, the official added.
Currently, most circles, which are contiguous to states, have around five to six operators, and given the new licences allotted, the number is soon expected to jump to 8-9 in each circle.
However, there would be no uniform capping and different circles would be subjected to different caps, which would be found out through an extensive exercise.
The current mergers and acquisitions policy doesn?t allow consolidation beyond a point to check monopolistic tendencies. For instance, it doesn?t allow an operator to have crossholding of more than 10% in two telecom entities in a circle. The combined market share of the two merged entities should not exceed 40% and post-merger the number of operators in a circle should not be less than four. In terms of spectrum, when two or more GSM operators merge, they cannot hold beyond 15 MHz spectrum. Obviously, these norms would have to be relaxed if capping is to be done to encourage the consolidation process.
