After a long period of policy paralysis and regulatory uncertainty following the 2G licence controversy, the Indian telecom sector witnessed signs of greater policy and regulatory clarity in 2013. The government is working towards the implementation of the policy road map envisaged under the National Telecom Policy, 2012. To this end, a unified licensing regime and merger and acquisition (M&A) guidelines have been finalised, and national roaming has been partly implemented. Removal of the foreign direct investment (FDI) limit has been key to reviving investor interest in the sector. Several other policy guidelines are at different stages of drafting and finalisation. Initiatives by the Department of Telecommunications (DoT) and the Telecom Regulatory Authority of India (TRAI) led to a considerable improvement in the operating environment in 2013 and the industry is now optimistic about the sector’s revival in 2014.

tele.net takes a look at some of the key regulatory developments in the Indian telecom sector in 2013...

•Unified licence guidelines: After multiple rounds of consultation and deliberation, DoT issued the unified licence guidelines in August 2013. As per the new norms, operators can sign roaming agreements but cannot add subscribers in circles where they do not hold licences. The guidelines bar operators from owning a stake in another service provider that holds spectrum in the same circle. Also, spectrum has been delinked from licences. All telecom companies will have to pay a licence fee of 8 per cent of their annual gross revenues to the government. In December 2013, DoT amended these guidelines to allow voluntary migration to the new licensing regime, as compared to the previous scenario of mandatory migration on licence expiry. Service providers with broadband wireless access spectrum will be allowed to offer voice telephony services through a unified licence after paying Rs 16.58 billion. However, the proposal to bring tower companies under the ambit of unified licensing guidelines is yet to be approved by the Telecom Commission.

•Spectrum sharing and trading: The Telecom Commission has given in-principle approval to TRAI’s recommendation for spectrum trading. The regulator, while giving its recommendations on the reserve price for the third round of spectrum auctions, also suggested that spectrum trading should be allowed only for airwaves purchased through auctions or for which service providers have paid the market-determined value to the government. Meanwhile, DoT has issued draft guidelines on spectrum sharing. As per the guidelines, operators will be allowed to share spectrum in the 1800 MHz, 900 MHz and 800 MHz bands in a circle, subject to the condition that each entity holds airwaves in that circle. Operators will be allowed to share spectrum for five years, which can be extended by another five years. Further, they will be required to pay an additional spectrum usage charge (SUC) for using each other’s airwaves. Operators will need to seek DoT’s permission before sharing spectrum. However, they will not be allowed to share spectrum in the 2100 MHz band.

•Implementation of new radiation norms: The government implemented new radiation norms for mobile handsets on September 1, 2013. As per the new norms, the exposure of radiation emitted from a mobile handset should not be more than 1.6 watt per gram of human tissue for six minutes of handset usage. Further, all new handsets will have to display a specific absorption rate, which provides information on radiation emitted from them. To ensure compliance with these rules, DoT has increased the penalty from Rs 500,000 per base transceiver station (BTS) to Rs 1 million per BTS for tower companies that violate radiation emission norms.

•Regulations for protecting consumer interest: TRAI issued the Mobile Banking (Quality of Service) (Amendment) Regulations, 2013, which provide guidelines and tariffs for unstructured supplementary service data-based mobile banking services. The regulator issued new penalty slabs for unsolicited commercial communications (UCC) and stated that the number of complaints against UCC declined from 12,848 per week in end-August 2013 to 5,000 in November 2013.

•FDI: The union cabinet approved 100 per cent FDI in the telecom sector. It allowed up to 49 per cent FDI through the automatic route, while additional investments would be subject to approval by the Foreign Investment Promotion Board (FIPB). Before this, FDI in the sector was limited to 74 per cent, of which 49 per cent was under the automatic route and the remaining was subject to FIPB approval.

•National roaming: While TRAI stated that roaming charges will not be completely waived off in the near future, it reduced the maximum national roaming charges for voice calls and SMSs. The tariff limit on outgoing STD calls was reduced from Rs 2.40 per minute to Rs 1.50 per minute while that on outgoing local calls was cut from Rs 1.40 per minute to Re 1 per minute. The limit for incoming calls was reduced from Rs 1.75 per minute to Re 0.75 per minute. Meanwhile, the maximum tariff for outgoing local and STD SMSs was fixed at Re 1 per SMS and Rs 1.50 per SMS respectively. The regulator allowed operators to introduce customised packages for users of roaming services including special tariff vouchers and combo vouchers, which were earlier restricted to home circles.

•New guidelines for VAS: As per the new norms, operators are required to seek double confirmation from consumers before activating value-added services (VAS) and are mandated to respond to deactivation requests within four hours. Further, operators are required to submit a monthly report on service activation, deactivation and complaint status to the regulator.

•M&A guidelines: The empowered group of ministers approved the M&A guidelines for the telecom sector with some modifications to the first draft. As per the new guidelines, two operators will be allowed to merge their business if their combined market share is up to 50 per cent, as against the 35 per cent proposed earlier. The merged entity will be required to pay a market-determined price for the quantum of excess spectrum (above 4.4 MHz) in the 1800 MHz band allocated at administrative prices. It will be allowed to hold a maximum of 25 per cent of the total spectrum assigned for access services in a circle and 50 per cent of the spectrum assigned in a given band in any circle. The M&A rules now await final approval from the cabinet.

Regulatory and policy expectations for 2014

The spectrum auction scheduled in February 2014 and its results would be the key highlights for the telecom industry in the coming months. After several rounds of deliberation, the government decided on the quantum and price of spectrum to be put up for sale; however, clarity on issues such as auction of spectrum in the 800 MHz band is still awaited.

That said, the response to the upcoming auctions has been heartening with eight operators – Bharti Airtel, Vodafone India, Idea Cellular, Reliance Communications, Aircel, Tata Teleservices Limited, Telewings Communications (erstwhile Uninor) and Reliance Jio Infocomm Limited – submitting applications for participation. Therefore, DoT is optimistic about the success of the auctions and is expecting revenue of Rs 113.43 billion. The impending expiry of licences and rationalisation of spectrum prices have been cited as the main reasons for increased operator interest in the auction. Prior to this, only one operator participated in the March 2013 auctions, while the response to the auction in November 2012 was also tepid.

The industry is likely to witness the finalisation and notification of several new policies on security, preferential market access, and machine-to-machine (M2M) communication in the coming months. Drafts for the first two policies are already in place, while the government is working on drafting regulations for the M2M segment.

Further, the industry may finally see clarity on long-standing 3G roaming agreement-related issues in 2014. Currently, operators are not allowed to add new 3G subscribers in circles where they do not hold licences. Meanwhile, the telecom industry is also hopeful about the implementation of nationwide mobile number portability.

The telecom sector has started witnessing early signs of policy and regulatory clarity. Currently, DoT and TRAI have several issues that need immediate attention and their expeditious resolution will drive sector growth in the future. Industry stakeholders expect further government support in regaining the lost momentum.