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Licence fees standardised and spectrum ownership restricted as India overhauls legislation

India’s spectrum licensing process is set for a significant overhaul, with the country’s Telecom Commission approving a number of policy changes. 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 licences.

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

The Indian regulator TRAI had reportedly proposed an incremental reduction of revenue share to 6% across the next four years, which would have saved the telecom sector around INR6,500 crore (US$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 their current licences will avail them 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 back to the regulator.

It has also been decided that the currently issued licences will be disassociated from the spectrum that they cover. In addition, the validity period for licences has been reduced to ten years, although this will only come into effect once the existing licences expire after their 20-year validity.

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