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.

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.

Guidelines for the Grant of Unified License Issued

The Department of Telecommunications (“DoT”) has issued the ‘Guidelines for grant of Unified License’ (“UL Guidelines”) vide notification No. 20-281/2010-AS-I (Vol. VI) dated August 19, 2013. The National Telecom Policy, 2012 laid down the need of a simplified licensing regime, in which service providers may be able to offer any or all services, using technology of its choice with flexibility in terms of area of operation, which would ensure greater participation of all types and sizes of entrepreneurships.

Our earlier posts on the unified licensing regime include “Unified Licensing regime in India likely soon: Department of Telecom” and later “Unified Licensing regime put in-place by the Department of Telecom” is here.

In contrast to the earlier regime, where spectrum was allocated through the bidding process, pursuant to the said Guidelines spectrum will now be delinked from the license and would have to be obtained separately.

Separate service authorizations have been stipulated under the UL Guidelines for the provision of different telecom services under the Unified License. The licensee shall at the time of making the application, have to specify the proposed services and service authorisation.

The UL Guidelines prescribe that the unified license shall be issued on non exclusive basis and one company shall be allowed to have only one unified license, subject to the fact that application can be made out for more than one service area.

A form, in which the service provider is the make an application for the grant of unified license has been provided under the UL Guidelines. As far the granting of the unified license is concerned, the same would be subject to fulfilment of all requisites under the UL Guidelines and meeting eligibility conditions by the applicant.

The existing licensees would mandatorily migrate to the new licensing regime upon the expiry of their existing licenses. The UL Guidelines prescribe that the UL Guidelines provide for a rebate in the entry fee on a pro-rata basis for the number of years remaining in the licence tenure and will be limited to a maximum of INR 15 crore.

The said UL Guidelines has barred holding of any equity stake by one licensee in another licensee company. In dealing with the situation of existing license, the UL Guidelines provide that a migration path will be provided to the existing licensees to migrate to unified license regime. However, the UL Guidelines do provide for a rebate on pro-rata basis to the Telecom Service Provider in entry fee for migration to unified license.

The DoT has issued the UL Guidelines, which are to act in consonance with the license agreement for unified license issued by the DoT earlier.

 

Unified Licensing regime put in-place by the Department of Telecom

The Minister of Communications and Information Technology, Kapil Sibal had on August 2, 2013, announced the implementation of the Unified Licensing Regime on the sidelines of the National Telecom Summit (Our previous post on “Unified Licensing regime in India likely soon: Department of Telecom” here). This announcement is in furtherance to an objective laid down by the National Telecom Policy 2012.

Pursuant to this announcement, the Department of Telecommunications (“DoT”) unveiled the Unified Licensing Regime. The new regime would allow the licencees to offer all telecom services under one license opposed to the existing regime of separate licenses.

The DoT has issued the draft of the License Agreement for Unified License (“UL License Agreement”) that would have to be executed by the service providers, in order to be able to provide the telecom services. However, the DoT would issue the Guidelines for Unified License within 10 days.

The UL License Agreement stipulates separate service authorizations for provision of the different telecom services under the Unified License. The licensee shall at the time of making the application, have to specify the proposed services and service authorisation. The scope of service and specific terms and conditions for each service has been prescribed under the UL License Agreement.

Additionally, the licensees under the regime would be able to share active infrastructure, which is not permitted presently. Under the current regime, the service providers are only permitted to share passive infrastructure.

The Unified License has freed the spectrum from the license. It also allows the licensees to enter into roaming pacts in any service area irrespective of the spectrum band held or technology used, not allowed earlier. Under the regime prior to the introduction of the Unified License the telecom companies were allowed to hold up to 10% equity in another telecom company operating in the same circle. Since, the Unified License bars such cross-holding between telecommunication companies, the same is likely to have an impact on the existing telecom operators as well.

The existing telecom licensees shall not hold any other license for the services covered under the scope of the License Agreement for Unified License. The telecom operators would necessarily have to migrate to the new licensing regime upon the expiry of their existing permits.

Further, Kapil Sibal also stated that the Mergers and Acquisition guidelines would be in place by September.