Ratings agency ICRA said that the move to relax the current spectrum holdings cap would ease the consolidation transactions which are in advanced stages and the merging telcos would not have to surrender any spectrum where earlier they could have breached the cap limits. The move will further allow telcos to offer better service with additional spectrum that they may get through this move, ICRA’s Sector Head and Vice President, Corporate Ratings, Harsh Jagnani said in a statement.
“The industry is undergoing structural changes with consolidation being at the forefront..Moreover, with growing data consumption, spectrum requirements would remain high and thus relaxing the spectrum cap is beneficial for the industry,” Jagnani said.
The Telecom Commission (TC) has on Tuesday accepted the recommendations of the Telecom Regulatory Authority of India (Trai) to relax the current spectrum holding caps.
Trai had recommended that the ceiling of 50% on spectrum held by telcos within a particular band should be removed, while a cap of 50% should be placed on the combined holding in efficient bands of 700 MHz, 800 MHz and 900 MHz. In addition, the regulator had also recommended to raise the overall cap on spectrum holding from the existing 25% to 35% in a circle. The Commission has concurred with these recommendations and has sent the same for Cabinet approval.
The Telecom Commission had earlier extended the time period for the payment of spectrum bought in auctions to 16 years from the current 10 years which would ease the cash outflow towards auction payments, ICRA said.
The spectrum caps were set at a time when there were 7 to 12 operators in each circle. ICRA said that the ongoing consolidation is expected to result in significant reduction in a number of operators.
“Thus an overall spectrum cap of 25% could be easily breached. Moreover, the removal of intra-band capping allows for the more efficient use of spectrum as it removes the constraint around technology deployment on different bands, it added.
Media reports suggest that the move is now set to give a push to mergers and acquisitions activity in the country. Various analysts said that the move would directly benefit Vodafone India and Idea Cellular, which are in the process of merging their operations.
After the completion of their merger, the combined Vodafone-Idea entity would be able to retain all the airwaves owned individually by the two companies.