The recommendations made by the Telecom Regulatory Authority of India (Trai) on 2G spectrum pricing and allocation and a host of related issues seems to have stirred a hornets nest within the telecom industry. The industry finds it complicated and short of putting a clear road map for growth.
While the regulator attempted to clean up the cluttered 2G space, many feel that it in turn has only muddled it up further and divided the winners and the losers very distinctly.
The regulator clearly surprised everyone with its choice of not opting for the auction route for further allotment of 2G spectrum.
According to the Trai?s recommendations, the government must allot the 2G spectrum?to operators who have the start-up 4.4 mhz spectrum and are eligible for the next tranche of 6.2 mhz first. Then come the operators who have 6.2 mhz and need additional spectrum. And last come the new operators who don?t even have the start-up 4.4 mhz. This would help a company like Reliance Communications, for example, which has the start-up 4.4 mhz and is awaiting the next tranche. For new licensees like Uninor, Etisalat DB and even Tata Teleservices?which are awaiting the start-up 4.4 mhz spectrum in a couple of circles?the priority list doesn?t bring cheer.
The regulator?s recommendations on mergers and acquisition have largely left the industry baffled as it increases the cost of acquisition apart from a transaction cost payable to the government. The companies would also have to pay for the spectrum in excess of the prescribed 6.2 mhz. This analysts say it would exorbitantly increase the costs and in fact discourage consolidation in the industry.
The spectrum-sharing regulation which allows only companies with the start-up spectrum of 4.4 mhz has made it possible only for the new entrants and Reliance Communications and Tata Teleservices to share spectrum barring the incumbent operators like Bharti Airtel, Vodafone Essar and Idea Cellular.