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‘Spectrum management and licensing framework’ by Trai

The Telecom Regulatory Authority of India (Trai) released recommendations on ‘spectrum management and licensing framework’ on 11 May 2010. While I am yet to read the paper in detail, I have brushed through it.

Excerpts of the recommendations

Trai has proposed that:

  • Licence fee paid by operators should be reduced in the next four years to a uniform 6% of adjusted gross revenue from the current 6-10%.
  • Spectrum over 6.2 mhz will have to be paid for at the current market price (achieved after 3G spectrum auction) by GSM operators.
  • Spectrum assigned for CDMA opera-tors beyond the contracted amount of 5 mhz will also have to be paid for.
  • A cap of 10 mhz spectrum per GSM operator and 7 mhz to each CDMA company be set. However, it is not in favour of capping the number of companies per circle if licences are de-linked from spectrum.

Trai’s recommendation — that service providers should pay an additional one-time fee for holding spectrum beyond 6.2mhz — will affect cash outflow of telecom operators, including Bharti, Vodafone, Aircel, Idea and BSNL, as they have spectrum well over 6.2mhz in many circles. According to the TRAI chairman J.S. Sarma, the one-time fee for holding 2G radio spectrum in excess of 6.2 MHz would mean that the telecom companies will need to pay an amount Rs 300-350 billion to the Government.

Falling realisations, high outflow for 3G and rising cost for running existing networks is likely to strain profitability of telecom companies.

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Categories: Telecom
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