Spectrum Sharing Guidelines Likely Only After Spectrum Auctions

The issuing of the guidelines for sharing of spectrum is likely to be delayed further and the same may be issued after the forthcoming spectrum auctions next month. The guidelines would be finalised and are likely to be issued after the auctions, upon finalisation.

The finalised guidelines were earlier supposed to be issued in December last year, however the same have not yet seen light of the day. Further, even the recent Notice Inviting Applications issued by the Department of Telecommunications (“DoT”) for the upcoming auctions in February, 2015 had indicated the guidelines for these would be notified in due course.

As per news reports, the DoT is not keen on announcing the guidelines before the auctions as this might prevent companies from aggressive bids is causing a revenue loss to the exchequer. However, the Telecom Commission, the highest policy making body of the DoT, is yet to take a final decision on the issue. Our previous post on the issue of spectrum sharing guidelines may be accessed here.

The Telecom Regulatory Authority of India (“TRAI”), in July 2014, recommended that sharing of spectrum in all bands (2G, 3G and 4G) should be allowed, subject to the condition that all operators have spectrum in the same band. The TRAI, however, specifically provided for a prohibition on leasing of spectrum. Additionally, the DoT plans to allow sharing of spectrum only between entities having 2G spectrum in the same service area and not between operators with spectrum in different service areas. Please refer or previous post on the recommendations issued by TRAI here.

DoT is in the process of finalisation of guidelines for inter-operator swapping. The said swapping is regardless of the type of allocation to ensure contiguity. The DoT has formulated a committee for the identification of issues concerning the industry, resolution of the issues and framing appropriate guidelines.

Additionally, the DoT is in process of reviewing the policy relating to licensing requirements for import of low powered wireless devices.

Getting the Deal Through – Telecoms and Media 2014

Co-Author: Salman Waris and Arjun Uppal

Publisher: Getting the Deal Through, Law Business Research, London

Published in: March 2014

Download: Getting the Deal Through – Telecoms and Media 2014 – India

---

Getting the Deal Through has published the revised and updated fifteenth edition of Telecoms and Media, a volume in the series of annual reports that provide international analysis in key areas of law and policy for corporate counsel, cross-border legal practitioners and business people.

This 2014 edition covers a number of key topics concerning the telecoms and media industry and the legal framework of 43 jurisdictions. Various sub-sectors and the concerned regulatory framework has been discussed under the heads of telecoms and media.

The chapter on India jurisdiction for Getting the Deal Through – Telecoms and Media 2014 has been co-authored by Salman Waris and Arjun Uppal and has been made available for download.

Key trends and expected changes in the Indian communications sector

A number of policy initiatives by the GoI and DoT have led to a complete transformation with phenomenal growth in the sector over the last decade and it is poised to grow further. The regulatory framework concerning communications and telecoms in India witnessed an evolution in recent years with the implementation of certain key initiatives, including MNP, USO and introduction of the unified licence, among other things. The country is projected to witness a high penetration of internet, broadband, and mobile subscribers in the near future. These steps were taken in line with the objectives set by the NTP 2012.

The unified licence regime, implemented recently, has simplified the telecoms licence regime and allows all telecoms services to be offered under one licence. The unified licence allows the sharing of spectrum among the various licences, which was not permitted earlier. The existing licences would also have to necessarily migrate to the unified licence regime upon the expiry of their subsisting licences.

The recent enhancement of the foreign investment limits from 74 per cent to 100 per cent for entities engaged in the telecoms sector is aimed at raising the participation of foreign telecoms entities into India, leading to an overall rapid development and increased capital infusion of the existing players and the market as a whole. A specially created group of the DoT has also cleared the mergers and acquisitions guidelines for the telecommunications sector, which would encourage consolidation in the sector. Once these guidelines are issued it will be interesting to see how they will be reconciled with the existing guidelines on mergers and acquisitions issued by the Competition Commission of India.

The telecoms tower providers’ industry has been endowed with the status of infrastructure provider. This will enable the tower providers to make use of the higher limits of external commercial borrowings, lower import duties and the exemptions on excise duty on infrastructure equipment.

The Supreme Court of India has adjudicated certain important cases involving spectrum. Therein previously allotted spectrum was cancelled and a new timeline for the spectrum allocation was laid down, in addition to reiteration of the principle of allotment of natural resources, including spectrum, only through auction process. Foreign entities have also been allowed to participate in the spectrum allotment and allocation process.

The upcoming trends in the sector would further lead to an upscale in the market. Full MNP (across different services areas), higher internet penetration and increased infusion of telecoms services to the rural and remote areas, etc in addition to a number of other objectives defined by the NTP 2012 are the initiatives to watch out for in the future. The GoI is targeting broadband connectivity from 15 million currently to over 600 million in 2020, with voice-connectivity being carried forward to data and emerging technologies including cloud computing.

Key trends and expected changes in the Indian media sector

The media and broadcasting sector in India witnesses regular growth on account of technological advancement and the implementation of modern day techniques for media content delivery.

India is already in the final stages of digitisation and is preparing to completely do away with the analogue system. IPTV and HITS services are among a number of those services that have been implemented and are gaining mass acceptance of the Indian population.

The TRAI is under process of formalisation of final recommendations on cross-media ownership and media plurality, among a number of diverse media-related issues.

Guidelines for Mergers & Acquisitions Issued by the DoT

The Department of Telecommunications (“DoT”), in furtherance to an objective of the National Telecom Policy – 2012 has issued the ‘Guidelines for Transfer/Merger of various categories of Telecommunication service license/authorisation under Unified Licence (“UL”) on compromises, arrangements and amalgamation of the companies’ February 20, 2014.

The schemes relating compromises, arrangements and amalgamation of companies have to be approved by National Company Law Tribunal (“NCLT”) as constituted under the Companies Act, 2013 (“Companies Act”).

In terms of the Telecom Regulatory Authority of India (“TRAI”) recommendations dated May 11, 2012 and November 3, 2011, the transfer / merger of various categories of telecom services licenses or authorisation under the UL granted by the DoT, has been permitted for proper conduct of telegraphs and telecommunication services.

Some of the important conditions in this regard are as follows:-

1. The DoT has to be notified for any proposal relating to compromise, arrangements and amalgamation of companies as filed before the NCLT.
2. The provisions for ‘substantial equity’ or ‘cross holding’ will not be applicable during a period of 1 (one) year, unless extended by the DoT in writing.
3. The merger of the license / authorisation will be for respective service category.
4. Upon transfer of assets, license / authorisation held by such acquired company to the acquiring company, the license / authorisation of the acquired company will be included in the resultant entity.
5. In order to offer any additional service or service area, the UL with concerned authorisation is to be obtained.
6. Considering the spectrum cap of 50% in a band for access services, the transfer / merger shall be allowed where the market share for Access Service in the respective service area of the resultant entity is up to 50%.
7. The Spectrum Usage Charge (“SUG”), prescribed from time to time by the Government, shall be payable on the total spectrum holding of the resultant entity.
8. Upon the implementation of the scheme the total spectrum held by the resultant entity should not exceed 25% of the total spectrum assigned for Access Services and 50% of the spectrum assigned in a given band in the concerned service area.
9. Excess spectrum held by the relevant entity as a result of merger should be surrendered within 1 (one) year of the permission being granted.
10. Any demand pertaining to the licenses of the merging entities shall have to be cleared by either of the two licensees before permission for merger / transfer of license / authorisation.
11. If the resultant entity becomes a ‘Significant Marker Power’ (“SMP”) after the transfer / merger of licenses in a service area, then the rules and regulations applicable to SMPs (such as The Telecommunications Interconnect (Reference Interconnect Offer) Regulations, 2002, for Access Service) shall also apply to the resultant entity.

In these Guidelines, any reference to NCLT includes the Company Judge performing such functions. It has been clarified that the dispute resolution shall lie with Telecom Dispute Settlement and Appellate Tribunal established under and as per provisions of the TRAI Act, 1997.

The DoT may modify these Guidelines or issue new guidelines if it considers necessary in the interest of national security, public interest and for proper conduct of telegraphs.

These Guidelines have been pending for a long time now. Earlier, it was announced that the Guidelines would be put in-place by September last year.