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In a bid to make 2G spectrum allocation more transparent, the Communications and IT Minister, Mr Kapil Sibal, on Saturday announced a complete overhaul of the existing policy by delinking telecom licence from spectrum.
This means that mobile operators from now on will have to pay a market determined price for spectrum.
Under the existing policy, operators are given a start-up spectrum of 4.4 Mhz and another tranche of 1.8 Mhz as part of the licence contract at no additional cost. Some of the old operators such as Bharti Airtel and Vodafone have been given as much 10 Mhz in some circles based on the subscriber-linked criteria. All this will change under the New Telecom Policy 2011 being formulated by Mr Sibal.
“In future, spectrum will not be bundled with licence. There will be no concept of contracted spectrum and no concept of initial or start-up spectrum. Spectrum will be made available only through market-driven process,” Mr Sibal said.
The new rules have financial implications for existing operators too. Incumbent players such as Airtel and Vodafone will be asked to pay for spectrum they hold beyond 6.2 Mhz. But the impact will be somewhat offset with the move to introduce a uniform licence fee.
Mr Rajan Mathews, Director General, Cellular Operators Association of India, said that he was pleased with the overall direction of the policy. “Higher payout for spectrum is unlikely to have any impact on mobile tariffs because this is a competitive market place. It could lead to a stabilisation in prices, especially by the new players,” Mr Mathews said.
The price of spectrum and the mode of allocation will be determined after the telecom regulator gives its final recommendation on 2G spectrum. Mr Sibal said that the adoption of an auction process needs to be seriously considered.
The shift in policy comes even as the Government is investigating allegations of corruption against former Telecom Minister Mr A. Raja for giving 2G spectrum to new players in 2008 at a throwaway price. The new policy will result in higher revenue generation for the Government.
“Mr Sibal has done the right thing by delinking licence and spectrum. Determining the price on a market based mechanism is an excellent move as it will once and for all make the allocation process transparent. The next step should be to change the merger and acquisition rules,” said Mr B.K. Syngal,
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