Trai to review telecom licensing norms

In a move whose outcome will determine the future of telecom in India, regulator Trai on Tuesday launched a consultation process seeking the industry’s views on reviewing key licence conditions and capping the number of telecom operators in a circle.

The process also seeks to rework the existing merger and acquisition guidelines and also find answers to the crucial question of whether operators can be allowed to provide both GSM and CDMA-based services in the same circle.

Trai has said that review of the current norms was necessary as competition and steady subscriber growth by itself may not be sufficient to sustain the phenomenal growth that this sector is currently witnessing. “It is imperative that policy framework is periodically reviewed to provide required catalyst for sustained growth.

From the perspective of the cellular telephony market, there is an urgent need to ensure a clear, fair, predictable, transparent and stable policy and regulatory framework, especially with regard to spectrum policy, investment norms, competition policy, and the licensing regime,” the regulator said.

At present, there is no cap on the number of operators who can provide services in a telecom circle, except that every circle must have a minimum of three telecom players. While refusing to take a stance on this issue, Trai has instead called for an open debate to address it.

If the existing operators wanted a cap, Trai has asked them to specify the methodology for fixing this number. Besides, Trai has also said that the consultation will examine if the number of operators in each service area should be determined by market forces.

With CDMA players such as Reliance Communications, HFCL and Shyam Telecom seeking spectrum in the GSM space, the consultation process will determine if these players can offer services using both technological platforms.

If there is consensus on the fact that players should be permitted to offer services on both platforms, then the process will also lay down guidelines which specify both the priority and methodology that will be followed for the allocation of spectrum in such cases, Trai said.

Acknowledging that mergers and acquisitions play an important role in enhancing economic growth, establishing effective competition, attracting investment, enhancing efficiency, improving economies of scale and scope and promoting efficient utilisation of resources, Trai has sought the comments from all stakeholders to rework all M&A norms.

This is because, under existing norms, which were issued in 2004 to induce competition and curb monopolies, an operator cannot hold more than 10% stake in a competing service provider in the same circle. (It was this clause that led to the Tata group selling its equity stake in Idea Cellular to the Birlas. This also resulted in Vodafone reducing its 10% holdings in Bharti Airtel after it acquired Hutchison’s 67% in Hutch-Essar.)

In case of a merger or acquisition, currently, the combined entity cannot hold more than 15 Mhz of spectrum in any circle. Besides, an acquisition or merger cannot take place if the process reduces the number of operators in any circle to less then three or if the combined entity has 67% market share in any telecom circle.

The consultation process, also seeks to review the 15 Mhz spectrum cap in the case of mergers. It will also determine the spectrum cap in the case of cross technology merger, where a GSM-based operator buys out a CDMA player or vice-versa. This is because, GSM and CDMA operators have different allocation criteria.

With regard to roll-out obligations, the regulator has sought the industry’s comments if these should be removed completely and market forces be allowed to decide the extent of coverage, as reported by ET on Tuesday. Trai has asked all stakeholders to send their comments to this consultation process by June 27, 2007.