DoT relaxes spectrum caps, raises payment tenure
The Department of Telecommunications (DoT) on Monday amended the terms of licences for mobile operators, increasing the number of spectrum instalments to 16 and relaxing the holding limits for airwaves.
The Department of Telecommunications (DoT) on Monday amended the terms of licences for mobile operators, increasing the number of spectrum instalments to 16 and relaxing the holding limits for airwaves.
The change in the licence terms, effective immediately, came after the Cabinet approved relief measures for the debt-laden telecom sector. The restructuring of deferred payment liabilities to 16 years from the earlier 10 will increase the cash flow in the immediate time frame.
The relaxation of spectrum caps will consolidate the sector and provide an opportunity to smaller players to exit by selling assets. Analysts say the longer duration of spectrum payments can increase the cash flow of operators by ~550 billion. The latest steps taken by the Centre were based on the recommendations of an interministerial group (IMG), formed in June.
On spectrum caps, the panel had asked the DoT to consider the opinion of the Telecom Regulatory Authority of India (Trai). Trai had recommended raising the overall spectrum holding limit from 25 per cent to 35 per cent and also removing the cap of 50 per cent holding in the same band. Instead, it suggested a cap of 50 per cent on the combined spectrum holding in the sub1 gigahertz (GHz) bands (700, 800, and 900 megahertz, or MHz).
The entry of Reliance Jio in September 2016 had compounded the problems of the industry, as the new entrant offered cheap tariffs, forcing the incumbents to bring down the rates to retain customers. But their profitability suffered, and most reported decreased revenues and squeezed margins. The new rules will help the sector, especially the merged entity of Vodafone and Idea Cellular, said analysts.
They said that the combined entity would have to pay 30 per cent less annual instalment on spectrum due to the increased payment tenure. It would also have the highest leverage among large players. Bharti Airtel’s annual spectrum payments would decline by ~14-17 billion.
With the increase in spectrum caps, Vodafone-Idea Cellular could retain all the airwaves. The relaxation in caps could make it easier for smaller operators, including Aircel, to sell their spectrum to big players and help entities, in the middle of a merger and acquisition, to retain spectrum.