DoT set to allow spectrum trading

Telecom companies will soon be able to buy and sell spectrum from each other, with the Department of Telecom (DoT) set to give its approval to spectrum trading. The biggest gainers will be struggling telecom companies, which will be able to use this route to exit the sector.

Bigger operators will also gain as they will be able to accumulate airwaves to offer high-speed data service applications such as mobile healthcare and video entertainment.

This will also resolve the ongoing 3G roaming dispute as operators can acquire 3G spectrum from other players to get a pan-India presence. Operators such as Airtel and Vodafone had inked roaming agreements because no player has a pan-India 3G presence. With spectrum trading allowed, Airtel could take spectrum from a player such as Aircel.

DoT will also permit a single operator to hold a maximum of 10 MHz of 3G spectrum compared to just one slot of 5 MHz now.

Spectrum trading will be included in the DoT guidelines for mergers and acquisitions, expected to be announced shortly. Currently, there is no mechanism for any telecom company to viably exit the sector.

For example, an operator such as Tata Teleservices, which has a net worth of minus ₹5,346 crore, could give rights to use its CDMA airwaves in the 800 MHz band to Sistema Shyam and, at the same time, give away its GSM spectrum in the 1800 MHz band to Telenor.

However, only operators who have paid the market price for spectrum will be allowed to trade.

The M&A guidelines, combined with spectrum trading norms, are expected to trigger a fresh round of consolidation in the sector. Mergers will be permitted as long as the combined market share of the entity is not over 50 per cent.

The entity will be allowed to hold 25 per cent of all spectrum in a given circle. This gives headroom for incumbent players such as Airtel and Vodafone to consolidate ownership.