The government’s stand may stabilise the much-needed regulatory environment for the sector
Interpreting the conditionalities strictly by the book, Sibal stated that showcause notices had been issued to 85 new licensees on 2G spectrum allocation, with a 60-day response time on why their licenses should not be revoked. A Kotak Institutional research report notes that most companies took steps to meet eligibility norms after the application date.
Also, about 119 new licensees, including 81 whose licenses are in question, are liable for penalties imposed by the Department of Telecommunication, as they have not met the required rollout obligations.
These measures are not expected to ease the near-term competitive intensity, as new licensees have only marginal market shares at present. However, if any cancellations come through, it would ease the future outlook for incumbent players – Bharti Airtel, Idea Cellular, Reliance Communications (RCom) and Vodafone – especially given the impending launch of number portability and 3G services.
Real gains will flow through only if the 2G spectrum pricing is delinked from the auction-based 3G pricing. The minister has said the issue will be discussed in the Parliament. An IIFL report points that the minister’s comments on considering revenue-share spectrum fees, when calculating loss to the exchequer, is a clear positive for Bharti Airtel (among listed players). Idea and RCom also stand to benefit, but to a less degree, as they received licences later. RCom may see some more pressure till clarity prevails on its association with Swan Telecom.
Overall, the main positive is the prospect of a more reasonable and stable regulatory policy, which will firmly bring the sector back into a fair play.