In October 2015, the Department of Telecom has issued the much awaited spectrum trading guidelines. Spectrum trading refers to transfer of rights to use the spectrum. After spectrum trading, the associated rights and obligations of the spectrum block shall stand transferred from the seller operator to the buyer operator. Under spectrum trading, only outright transfer of spectrum is permitted i.e. the ownership of the usage right is transferred to the buyer operator.
Summary of the Spectrum Trading Guidelines 2015
- The ownership of the spectrum will remain with the Government of India. Government will give ‘right of use’ to operators through auction. The right of use can be traded between two service providers. Spectrum trading will not alter the original validity period of spectrum assignment.
- Spectrum trading will be allowed only between two access service providers by outright transfer of right to use the spectrum from the seller to the buyer. Spectrum leasing is not allowed.
- Spectrum can be traded in different frequencies of 800 MHz (CDMA), 900 MHz (2G and 3G), 1800 MHz (2G and 4G), 2100 MHz (3G), 2300 MHz (4G) and 2500 MHz (4G). However, only spectrum purchased in an auction or by paying the market price can be traded.
- Both the licensees trading the spectrum have to jointly give a prior intimation for trading the right to use the spectrum at least 45 days before the proposed effective date of the trading.
- Spectrum trading shall be permitted on a pan-licensed service area basis or telecom circle basis. If the seller’s spectrum is restricted to only to a part of the circle, then the rights and obligations of the seller over the remaining part of the circle will also be transferred to the buyer.
- The seller shall clear all his dues prior to entering into any agreement for spectrum trading. Any dues recoverable after the effective date of trade will be the liability of the buyer.
- All access spectrum bands earmarked for access services by the licensor will be treated as tradable spectrum bands.
- A telecom service provider will be allowed to sell the spectrum through trading only after two years from the date of its acquisition.
- A non-refundable transfer fee of one percent of the transactional amount or one percent of the prescribed market price will be levied on the buyer.
- The buyer should be in compliance of the prescribed spectrum caps from time to time.
- The norms also allow telecom operators to change their frequency spot through mutual agreements and such changes will not be treated as spectrum trading. The move will allow telecom companies to align their frequency spots and provide high-end service at a lower cost.
- While telecom operators will be free to decide the price at which they want to trade spectrum, the government can levy taxes and other charges based on the market price, which should not be less than the latest auction-determined price.
Potential Benefits from spectrum trading
Spectrum trading would result in consolidation of the telecom industry. It will provide exit opportunity to operators who have not been able to operate or making losses in India by selling off their spectrum. It would provide bigger players to buy new spectrum and improve the quality of service for customers. They do not have to wait for the spectrum auction to get additional spectrum. Further, it will address the problem of shortage of spectrum and resolve the complaints of customers on frequent call drops.