Monday, 11 April 2011

New telecom policy caps licences at 10 years; moves to uniform fee

The Communications and IT Minister, Mr Kapil Sibal, on Monday unveiled the broad contours of the Telecom Policy 2011 including liberal merger and acquisition norms, the new licensing regime and a Spectrum Act to govern allocation of airwaves.

On the proposed changes in the licensing regime, Mr Sibal said that from now on telecom licences will be given for a period of 10 years only. This means more capital outgo for telecom companies as they will have to renew their licences every 10 years.

The current policy allows operators to hold on to their licences for a 20-year period. Operators wanting to renew their licences will have to apply 30 months before the expiry date. Thus old operators such as Bharti Airtel, whose licences are valid till 2013-14, will have to apply for renewal right away.

Operators will be given the option of taking licences at the national level or continue with the existing system of circle-wise licensing. Pan-India operators such as Vodafone, Reliance Communications may find it beneficial to go for a national licence.

The big one, however, is the decision to move to a uniform licence fee. Operators currently pay between 6 and 10 per cent of their revenues depending on the circle of operation. Uniform fee would lower the financial burden on operators.
M&A norms

On M&A norms, the Minister said there is a need for liberal guidelines, but at the same time there should be enough competition. Hence the minimum number of operators will not be allowed to fall below six at any point in time in each circle.

Under the current rules, the threshold level is set at four operators in each circle. But since there are as many as 12-13 operators in each area, the proposed change will not have much impact. Other key details of the new M&A norms are still being worked out.

To address issues relating to spectrum allocation, a committee, under the chairmanship of retired Supreme Court judge Shivraj Patil, has been appointed to draft a Spectrum Act. The Act will govern future spectrum allocation.

In addition the Department of Telecom will appoint external agencies conduct regular audit to determine efficient usage of airwaves by mobile companies and other non-commercial users such as the defence and Department of Space. Another move that will benefit operators is the decision to allow spectrum sharing. But the DoT will stipulate conditions for the same, details of which were not revealed.

But this is not the final policy yet. Mr Sibal said that these proposals will be put before the Telecom Commission for a final decision by the end of the year. Industry observers said that the proposals are in line with the recommendations of the TRAI but the actual impact on the operators will be known only after details regarding spectrum pricing and M&A guidelines are announced.

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