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Spectrum Trading: A Boon For Indian Telcos

The Indian government’s decision to permit spectrum trading is likely to go a long way towards improving service quality by helping to address spectrum shortages in the country.

Although it will not alter the original validity of the spectrum license, the trading of airwaves will allow service providers to acquire usage rights from other players.

Incumbents like Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Idea Cellular Ltd. andVodafone India stand to gain from this move, acquiring spectrum as and when they need to expand. It is also likely to benefit new entrant Reliance Jio , which may be interested in purchasing more 800MHz for its LTE FDD network. A possible seller could be Reliance Communications Ltd. , which could be interested in selling its liberalized holdings in the 800MHz frequency band or even its 3G spectrum.

With mobile data services gaining in popularity among Indian consumers, operators are clearly facing a spectrum crunch. India also has a poor reputation for quality of service, with operators blaming this on the shortage of available spectrum. Spectrum trading should go some way towards helping operators overcome these problems.

But the country’s smaller players are also likely to welcome the new rules, which will allow them to leverage spectrum resources to reduce debts. Keen to hive off their telecom businesses, companies like Aircel Ltd. and Tata Teleservices Ltd.will now be able to sell airwaves to bigger players.

The rules might not suit everyone, however. One stipulation is that operators with 800MHz spectrum acquired in 2013 must stump up a fee based on prices paid in this year’s auction before they can enter into trading agreements. That could prevent companies like Sistema Shyam TeleServices Ltd. from taking advantage of the new rules.

Even so, the broader industry is sure to welcome this as a positive move. It will also help the government to meet its target of having 600 million broadband users in the country by 2020.

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