Cabinet approves easing spectrum cap

Cabinet approves easing spectrum cap

Context:

The Union Cabinet has approved relaxing the cap on spectrum holding by telcos

Details:

• The Cabinet has also given telcos the option to extend the time period for payment of spectrum bought in auction to 16 years from the present 10 years.
• This is likely to help with the cash flow in the short to medium term, while adding Rs. 74,446 crore till 2034-35 to the government’s kitty due to no reduction in interest rates.
• The cap on overall spectrum that can be held by an operator in a circle has been raised to 35% from the current 25%.
• In line with earlier recommendations of TRAI, the current cap of 50% on intra-band spectrum holding has also been removed.
• Instead, there will be a cap of 50% on the combined spectrum holding in the sub-1 GHz bands (700 MHz, 800 MHz and 900 MHz bands).
• There will be no cap on individual or combined spectrum holding in the above 1 GHz band.

Significance of the Move:

• Revising the limit for the spectrum cap holding will facilitate consolidation of telecom licensees and may encourage the participation in the future auction
• Further, the telecom operators will now be able to trade in excess (subject to the prescribed time limit) as well as the current spectrum held by them with other telecom operators depending upon their current spectrum holdings.
• The relief measures, based on the recommendations by the Inter Ministerial Group on stressed assets in the telecom sector will enhance ease of doing business

Existing Issues:

• The debt payment extension will have only minimal benefit unless the interest rate is also reduced
• The systemic issues of the industry such as excessive taxes and levies of 30% or more remained unaddressed.