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Relaxation of spectrum holding caps will aid consolidation: ICRA

12 January 2018

Telecom stocks Idea Cellular, Bharti Airtel and Reliance Communications (RCom) gained up to 4 per cent in Wednesday's trade after the Telecom Commission (TC) chose to relax spectrum holding caps.

Currently, as per rules for spectrum cap, no operator can have more than 25% of the total spectrum allocated in a circle and 50% in a given band. Earlier, Airtel had announced acquisition of Telenor and wireless assets of Tata Group.

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.

TRAI had, in November, also recommended that the current cap of 50% on intra-band spectrum holding be removed, and instead be a cap of 50% on the combined spectrum holding in the sub-1 GHz bands (700 MHz, 800 MHz and 900 MHz bands). "We see the top-three operators, Bharti, Jio and Idea, gaining an aggregate 86% market share by March 2019 and over 95% of industry revenues by March 2021".

One telecom service provider submitted that while a number of consolidations are on-going in the telecom industry, it is essential to ensure that level playing field is not upset to address entity specific challenges with spectrum caps.

"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. This move will further delay Arpu (average revenue per user) recovery.

The official said DoT will send drafts of the relief package cleared by the Telecom Commission based on the recommendations of an inter-ministerial panel to Cabinet this week for final approval.

The commission also extended the payments tenure for auctioned airwaves from 12 years to 16 years, and lowered the interest rate on penalties on outstanding dues of telcos from 14 per cent to 12 per cent.

Relaxation of spectrum holding caps will aid consolidation: ICRA