TRAI recommends cancellation of new telcos’ licenses:: Anand Rathi

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India Telecoms
TRAI recommends cancellation of new telcos’ licenses
 Noose tightening around new telcos. Media reports (e.g., Financial
Chronicle, 18 Nov) suggest that TRAI has written to DoT recommending
cancellation of 69 telecom licenses for non-fulfillment of roll-out
obligations as per licensing conditions. TRAI has recommended outright
cancellation of 38 licenses and made a case for another 31 to be legally
examined for cancellation. The DoT has to take the final call on the issue.
Telcos faced with outright cancellation of licenses are: Essar Group-owned
Loop Telecom (14 licenses), Sistema Shyam (10), Uninor (8), Aircel (4) and
Etisalat DB (2). Telcos whose licenses are recommended to be cancelled
after legal examination by DoT are: Etisalat DB (13 licenses), Videocon
(10), Loop (6), Sistema Shyam (1) and Aircel (1).


 RCom/Idea – Key beneficiaries of potential ‘spectrum dividend’...If the 69
licenses are cancelled, ~280MHz of 2G spectrum across 22 circles would revert
to DoT. This freed-up spectrum could be allotted to incumbents who have not
yet received the total 6.2MHz ‘contracted spectrum’. Notably, RCom has only
4.4MHz of GSM spectrum in 14 circles and could receive additional 1.8MHz of
spectrum in each circle. Similarly, Idea/Vodafone could obtain an additional
1.8MHz in 11/7 circles. Bharti has already received the ‘contracted’ 6.2MHz
spectrum in all its circles and would not benefit from the freed up spectrum.

 …freed up spectrum could also be used for allocation beyond
‘contracted’ amount…RCom could receive up to 43.8MHz of additional
spectrum across 21 circles, based on TRAI-recommended cap (yet to be
ratified by DoT) of 8MHz per operator per circle (10MHz in metros).
Similarly, Idea, Vodafone and Bharti could receive up to 33MHz (in 16
circles), 28MHz (17 circles) and 20MHz (13 circles) respectively. Note that
any additional 2G spectrum allotment would most likely happen at market
prices (TRAI recommendations on 2G spectrum price are awaited) and be
linked to certain eligibility conditions (presently under review).

 …however, DoT would first have to take a call on a range of issues.
We believe that cancellation of telecoms licenses could be a tough decision
for the government (as there are very few such precedents in India) and turn
out a long drawn-out process. Besides, before any ‘freed up’ spectrum is
allotted to telcos, DoT has to finalize 2G spectrum policy (including
spectrum allocation criteria, pricing, spectrum caps). There has not been
much progress on TRAI’s May ’11 recommendations on these issues