Major changes in India’s telecom policy likely this year

India's spectrum licensing process is set for a significant overhaul, with the country's Telecom Commission approving a number of policy changes recommended by the department of telecommunications and the Telecom Regulatory Authority of India.

With a projected implementation date of October 2011, the new legislation would limit the amount of spectrum that one operator can hold, as well as standardise the charge for licenses, says a government release.

License charges are currently calculated based on the telecom circle that the licence covers – operators pay 10 per cent of annual revenue as a fee in the highest-tier circles as well as major cities, and around 6 per cent in the lowest tier. The new standard fee has been set at 8.5 per cent of total annual revenues.

TRAI had reportedly proposed an incremental reduction of revenue share to 6 per cent across the next four years, which would have saved the telecom sector around Rs6,500 crore ($1.5 billion) over the next three years.

While the commission's standardisation of fees evidently does not take this proposal into account, TRAI's proposals for spectrum were acted upon. Specified amounts (6.2MHz for GSM, 5MHz for CDMA) will now be sold to operators at a rate determined by TRAI and based on the spectrum's current market value.

These new restrictions could prove problematic for major operators such as Bharti, Idea Cellular and Vodafone Essar, as with their current licenses they can avail of just 6.2MHz of 2G spectrum when renewed, despite the fact that they hold as much as 10MHz in several circles. This excess spectrum will revert to the government.