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New Telecom Policy

The New Telecom Policy was announced by communications minister Kapil Sibal on 15 February 2012.

The key policy measures are aimed at reassuring incumbent operators who had been seeking clarity in rules at a time when the government is making every possible effort to put the scam-tainted telecom sector back on track.

Telcos operating in the same region will be allowed to share 2G spectrum. Operators can now share 2G spectrum only in the same service area and those sharing it should hold spectrum. It means operators having spectrum in a few circles cannot enter into roaming agreements in circles where they do not hold spectrum.

All future allocation of airwaves will only be through auctions. Also, future licences will be delinked from spectrum and companies must buy bandwidth at market rates.

The New Policy :

The government also decided to allow sharing of bandwidth and eased rules for mergers and acquisitions (M&As) in the telecom sector. The maximum airwaves that companies can hold, also known as the prescribed limit, was enhanced to 8 MHz in all regions except Delhi and Mumbai, where the cap is at 10 MHz.

The new policy favours a unified licence regime and a uniform licence fee of 8% of an operator’s adjusted gross revenue (AGR) across all telecom service areas. telcos currently pay 6-10% of their AGR as license fees.

The policy defined the exit policy permitting mergers between operators, which do not exceed 35% of the market share and 25% of the spectrum available in the sector.

The policy allows spectrum sharing, too, though the government has refused to allow leasing and left a decision on spectrum trading for a later date. The sharing will initially be allowed for five years and could be renewed for another five on terms to be prescribed.

Currently, mergers are allowed only if the combined market share of the entities does not exceed 30 per cent. That has been raised to 35 per cent. Under the new rules on merger the combined entity can hold 25 per cent of the total spectrum in a circle.

Telecom regulkator TRAI had recommended that telecom companies could merge their operations if the combined market share of the new entity is less than 60%.

DoT :

The department of telecom (DoT) prescribed a limit of 2x8 MHz to be assigned to a GSM service provider and 2x5 MHz for CDMA players while renewing licences for another 10 years.

Taking into consideration the higher density in the two key metros of Delhi and Mumbai, the limit will be 2x10 MHz and 2x6.25 MHz for GSM and CDMA players, respectively.

An operator can acquire additional spectrum beyond these prescribed limits through a market mechanism. Operators keen to extend the licence will have to pay a fee of Rs 2 crore for metro and A circles, Rs 1 crore for B circles and Rs 50 lakh for C circles.

Earlier, the operators were assigned spectrum based on subscriber-linked criteria. DoT accepted the recommendation for refarming of spectrum. Spectrum trading and leasing have however not been allowed.

Backdrop :

Operators had shelled out Rs 65000 crore for 3G spectrum, and none was able to get pan-India spectrum. The operators were hopeful that the government would liberalise the sharing of 3G spectrum. Three operators had challenged an earlier government decision to this effect before the TDSAT.



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