Sibal delinks telecom licence, spectrum

Written by fe Bureau | New Delhi | Updated: Jan 30 2011, 07:30am hrs
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Attempting to clean up the mess surrounding 2G licensing and spectrum, telecom minister Kapil Sibal Saturday outlined the broad contours of New Telecom Policy (NTP) 2011.

Unique features of NTP 2011 include delinking licence from spectrum, allocating spectrum on a market-linked price mechanism and a uniform fee for all licences. This would mean that henceforth, a new telecom licence would be given for a nominal entry fee, after which operators would have to pay a market-determined price for getting spectrum.

The market-determined spectrum price could be arrived at through auctions or any other mechanism suggested by the Telecom Regulatory Authority of India (Trai), Sibal said. Once NTP 2011 is in place, the concepts of start-up spectrum, additional spectrum and subscriber-linked criteria for allocating spectrum will cease to exist.

The move would adversely impact new operators like Uninor, Etisalat and Loop besides the GSM businesses of Tata Teleservices and Reliance Communications, all of whom have 4.4 Mhz of spectrum. They will now have to pay market-determined rates to get the next 1.8 Mhz or any other additional spectrum.

Sibals announcement contrasts with Trai's May 2010 recommendations, which said that all operators be given spectrum till 6.2 Mhz as mandated in the licence condition and a new payment mechanism applied after that.

This was opposed by incumbent operators, all of whom have spectrum beyond 6.2 Mhz and even up to 10 Mhz in certain circles. They wanted a single unified regime for all operators.

Stating that the government has the right to change policy, Sibal said he will not undo the previous contract but focus on future ones. This means while operators like Bharti, Vodafone and Idea will have to pay for spectrum beyond 6.2 Mhz, new operators like Uninor, Etisalat and Loop as well as the GSM arm of RCom and TTSL will have to pay for beyond 4.4 Mhz.

Opposition to Sibals move started coming from new operators with TTSL issuing a statement saying that for a level playing field, all operators should be given spectrum up to 6.2 Mhz and any new payment mechanism only applied after that.

Deepak Gulati, executive president, mobility business, Tata Teleservices said: In line with what we have been stating during the consultation process held by Trai in the first half of 2010, we would re-emphasise that all operators be given 6.2 Mhz spectrum in a manner that those waiting for start-up spectrum are first allocated the same, as also those who have excess spectrum are charged for the same, preferably retrospectively, to bring all operators to a level playing field.

Though none of the incumbent operators were willing to go on record, their executives told FE that they wholly welcome Sibals policy.

Regarding the 85 controversial licences granted by former telecom minister A Raja, Sibal said in case any of these licences were cancelled, the new ones to be issued in lieu of them would come under the new dispensation.

These licences are currently being reviewed by the Department of Telecommunications and the Supreme Court. This will mean that a new licencee will be given a licence on the payment of the nominal entry fee and will have to pay for the spectrum on a market-determined price.

Sources said Sibals move will either way lead to the government earning revenue. If the licences are cancelled and new ones issued, the government will charge them market-determined price for allocating spectrum; even if they are not cancelled, spectrum beyond 4.4 Mhz will be allotted to them on the payment of a market-determined price.

Sibal said he will come with a uniform licence fee for all kinds of licences. Currently, Unified Access Service Licences come with a revenue share licence fee ranging 6-10%, while ILD and NLD licences have a licence fee of 6%. For internet services minus telephony, there is no licence fee. The varying slabs of licence fee leads to arbitrage leading operators to shift revenue from one stream to another to save on payment. A major telecom operator has already been found guilty of this practice.