The Cabinet on Wednesday cleared spectrum trading guidelines under which telecom operators will be able to sell radiowaves to other service providers, a move that will help address the problem of spectrum shortage.
"Cabinet has approved spectrum trading today (Wednesday).
Telecom sector has been demanding it for optimum utilisation of spectrum," Telecom Minister Ravi Shankar Prasad said here.
As of now only government is allowed to allocate spectrum to telecom firms through auctions.
"The ownership right will be with the Government of India.
We give right of use to operators through auction. That right of use can be traded between two service providers," Prasad said.
Industry had been waiting for spectrum trading guidelines before they proceed with their consolidation plans.
Deloitte Haskins & Sells LLP Partner Hemant Joshi said that spectrum trading would provide bigger players, who have congested networks, a chance to buy new spectrum and improve the quality of service for customers.
"Spectrum trading would provide exit opportunity to operators who have not been able to build scale in India and have been facing unprofitable operations by selling off their spectrum," Joshi said.
Last month, government approved spectrum sharing guidelines aimed at addressing spectrum shortage in the country and allowing operators to mutually use radiowaves to provide services.
The government, however, has not heeded to the industry demand of keeping the amount received from trading out of the adjusted gross revenue. As per the rule, revenue from trading will form part of component to calculate licence fee and spectrum usage charges levied annually on telecom firms.
For entering into trading agreement, telecom operators will not require prior permission from the government but they will have to inform the authorities 45 days before entering into such pacts, the minister said.
The seller and buyer entering into trading agreement will have to give an undertaking that their pact is in compliance to all rules and regulations.
"In sample check if it is found that undertaking is wrong then action will be taken including cancellation of trading agreement," Prasad said.
The trading is also expected to indicate market rate of radiowaves. At present it is determined only through auctions conducted by the government.
"Spectrum trading has been permitted in all the bands," Prasad said.
He said telecom operators will be able to trade spectrum allocated to them under old licensing regime after liberalising it by paying market determined price.
"Auction purchased spectrum can straight away go for trading. The buyer will have to pay 1 per cent trading fee (to government) which will be calculated based on market rate or previous auction price whichever is higher," Prasad said.
Companies will have to pay differential of the latest auction price and the March 2013 auction price for CDMA spectrum before entering into trading agreement.
Sistema Shyam Teleservices, controlled by Russian conglomerate Sistema JSFC, is the only company which fall under this category.
"The seller shall clear all his dues prior to entering into any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of transfer shall be the liability of the buyer," an official statement said.
The spectrum trading will not change its original validity period for which it has been allocated to a telecom company.
Telecom operator can trade spectrum after two years of acquiring it either auction or trading before it can trade it further.
"In December, 2013, the then Government had approved in-principle the spectrum trading but the detailed guidelines were not issued and therefore this policy could not be implemented," the statement said.