The union cabinet has relaxed spectrum holding caps for telecom companies, raising the ceiling from 25 per cent to 35 per cent, thereby giving a boost to consolidation in the telecom sector and giving a boost to spectrum sale, as debt-laden mobile service providers try to sell assets, to repay debt.
The union cabinet on Wednesday cleared the relief package following a ministerial panel's recommendation to raise the ceiling for spectrum holding to 35 per cent.
The cabinet on Wednesday also extended the payments tenure for auctioned airwaves from 12 years, including a two-year moratorium, to 16 years, as a one-time measure, giving much needed relief to carriers reeling under debt burden of more than Rs7,70,000 crore.
''With the restructuring of the deferred payment liability, the cash flow for the telecom service providers will increased in the immediate time frame providing them some relief,'' a government release stated.
''The increased instalment is based upon the principle that the Net Present Value (NPV) of the payment due is protected as per respective notice inviting application for auction of spectrum from 2012. The total amount received will be higher by Rs74,446.01 crore till 2034-35,'' the release added.
Current regulations bar a merged entity from holding more than 25 per cent of the spectrum allocated in a service area or circle, and over 50 per cent in a particular band.
''Revising the limit for the spectrum cap holding will facilitate consolidation of telecom licenses and may encourage the participation in future auctions,'' the release noted.
The changed limits may be revisited after Final Acts of World Radiocommunication Conference (WRC) 2019.
The cabinet endorsed the recommendations of the Telecom Commission, headed by telecom secretary Aruna Sundararajan, to do away with the 50 per cent cap on intra-band spectrum holdings of telcos and instead impose a separate 50 per cent cap on the combined spectrum holdings in the 700 MHz, 800 MHz and 900 MHz bands (sub-1GHz bands).
The relaxed spectrum caps will help Reliance Jio, to mop up more airwaves in the 4G-ready 850 MHz band. Jio holds the maximum quantity of airwaves in the 850 MHz band across all 22 circles, and the increased caps will give it a leeway to acquire more spectrum from Reliance Communications, which still has 70 MHz of the bandwidth.
The Anil Ambani-owned Reliance Communications will be able to overturn an arbitration court ruling that bars it from selling its assets.
The relaxed spectrum caps will also benefit the merged Vodafone-Idea entity as well as Airtel, which is merging wireless operations of Tata Teleservices, Telenor and Tikona with itself.