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Spectrum trading norms may affect telecom firms finances

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Once spectrum trading is allowed, the government might include proceeds from this in telecom operators’ adjusted gross revenue (AGR), which could impact the financials of these companies, already reeling under huge debt.
The Department of Telecommunications ( DoT) has written to the finance ministry, seeking its view on the matter. Internally, the department was of the opinion that proceeds from revenue through spectrum trading should be part of telcos’ AGR, said a senior DoT official.
Speaking on the issue, Ravi Shankar Prasad, minister for communications and information technology, told the Business Standard, “ We have written to the finance ministry on this issue. A final view will be taken only after we receive their inputs. The norms for trading will be announced soon.” In its recommendations, the Telecom Regulatory Authority of India had said, “The amount received from trading will be part of the AGR for the purpose of licence fee… and spectrum usage charges ( SUC) will be applied on spectrum acquired through trading.” Also, operators will have to pay one per cent of the transaction amount to the government.
Telecom companies had written to the government, from spectrum trading trading is a deterrent to trading, In their letter, the telcos said, “ Only the capital gains, i. e. sale proceeds from spectrum trading less the cost of acquisition ( including cost of liberalisation of administrative spectrum) may be considered for the purpose of licence fee and SUC.” Last week, the Cabinet allowed spectrum- sharing norms, allowing operators to share spectrum in the same band. This will enable them to improve cost efficiency, increase capacity for heavy mobile voice and data traffic, and reduce call drops. But the Cabinet did not take any decision on trading rules.
When allowed, spectrum trading will allow telcos to trade unused spectrum with other operators, without waiting for the next round of spectrum auction.
This could give an exit route to smaller players, besides giving them the option of trading in particular circles. In an analyst note, Bank of America Merrill Lynch said it didn’t think spectrum- sharing norms were a game changer. “ No material uptake in sharing by telecom companies and the lack of trading norms, which would have provided smaller companies an exit, is disappointing,” it said.
Business Standard, New Delhi, 19th August 2015

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