TRAI paves the way for greater consolidation in telecom
The telecom watchdog Telecom Regulatory Authority of India (TRAI) has recently recommended to the department of telecom (DoT) to increase the caps on the spectrum holding in all telecom circles.
For instance, TRAI has said that there should be no intra-band cap in each of the circle. However, to ensure that the low frequency bands are utilised to provide mobile broadband services over larger areas with low population density, there's a cap of 50 per cent on the combined spectrum holding in bands like 700 megahertz (MHz), 800 MHz and 900 MHz. Besides, the overall spectrum cap could be hiked from 25 per cent to 35 per cent in all telecom circles, TRAI has suggested. Currently, there are 22 telecom circles in the country.
The idea of having spectrum caps is to ensure that no single operator becomes too large to dominate a particular market, and therefore, price its tariffs significantly high. The series of acquisitions in the sector over the past two years have created three large operators - Bharti Airtel, Reliance Jio and Idea-Vodafone combine - with each of them having spectrum holdings close to the existing caps.
As per the current rules, the spectrum holding of Idea Cellular and Vodafone India is set to exceed in five circles in the 2500 MHz and 900 MHz bands once they complete their proposed merger next year. The raising of caps is expected to make it feasible for large operators to acquire fringe players like Reliance Communications and Aircel which are up for grabs for some time. According to RCom, its 200-MHz spectrum holding is worth Rs 19,000 crore based on the last auction pricing.
Removing of spectrum cap may augur well for the operators but there's a clear downside to it. The recommendation is expected to create four large entities (including state-owned BSNL) that will have undue control over the market. It will be the exact opposite to the stand taken by the previous governments that allowed entry of smaller players to grow competition.