In a move that is expected to transform the usage of air waves in the telecom sector, the Union Cabinet on Wednesday approved guidelines on telecom spectrum trading. The decision, based on the recommendations of the Telecom Regulatory Authority of India (TRAI), will enable telecom companies with a low subscriber base or unutilised spectrum to trade in spectrum.

“The Cabinet has approved spectrum trading. The telecom sector has been demanding it for optimum utilisation of spectrum,” Ravi Shankar Prasad, Communications and IT Minister, said in an official briefing. He made it clear that “the ownership right will be with the Government of India”.

On Tuesday, BusinessLine had reported that the Cabinet was likely to approve the guidelines on spectrum trading at its meeting today.

Prior permission Under the guidelines, telcos will not require prior government permission to enter a trading pact but will have to inform the licence issuing authority 45 days in advance, Prasad said.

Trading will be allowed between two access service providers only for outright transfer of right to use the spectrum from the seller to the buyer. Also, trading will not alter the original validity period of spectrum assignment as applicable to the traded block. 

As of now, only the government is allowed to allocate spectrum to telcos through auctions.

“Auction purchased spectrum can straight away go for trading. The buyer will have to pay 1 per cent trading fee, which will be calculated based on the market rate or previous auction price, whichever is higher,” said the Minister.

No dues A licensee will not be allowed to trade in spectrum if it has been established that the licensee had breached the terms and conditions and the licensor has ordered for its revocation/ termination. 

Also, the seller is required to clear all its dues prior to entering a trading pact.

Thereafter, any dues recoverable up to the effective date of transfer shall be the liability of the buyer.

In such a scenario, the government is entitled to recover the amount, if any, found recoverable subsequent to the effective date of the transfer, which was not known to the parties at the time of the effective date of transfer, from the buyer or seller, jointly or severally. 

Spectrum trading shall be permitted only on a pan-licensed service area (LSA) basis.

Clear roadmap “The entire roadmap gets clear with already announced spectrum sharing and M&A policies. This will make decision-making between operators very quick and soon we will see telcos signing pacts,” said Arvind Bali, Director and Chief Executive Officer, Videocon Telecommunications.

He added that his company is already in active discussions with three telecom operators to explore spectrum-trading and sharing possibilities.

“Spectrum trading would provide an exit opportunity to operators who have not been able to build scale in India. Also, it would provide bigger players who have congested networks to buy new spectrum and improve quality of service,” said Hemant Joshi, Partner, Deloitte Haskins & Sells LLP.

Related Topics
comment COMMENT NOW