Dr Rahul Khullar, Chairman, Telecom Regulatory Authority of India (TRAI), met some institutional investors and analysts, to share the regulator’s views on Indian telecom sector post the recent round of spectrum auctions. The regulator took credit of the recently concluded auction by saying Average spectrum holding of telecom operators in India was the lowest globally before the Feb 2014 auctions.
Improving spectrum supply and sector consolidation will increase average spectrum holding and enhance customer experience. The following round of auctions could include, a) 800MHz band in the near term, b) 900/1800MHz for 33 license renewals due over next two years, and c) 3G spectrum for 2-3 additional operators.
Spectrum price increase during the feb 2014 auction in 2-3 circles was due to competition while pan-India price increase was not as high. Higher spectrum costs could lead to price hikes for mobile services. However, the chairman is not perturbed given that tariffs in India have been the lowest in the world despite steep cost inflation. Entry of Reliance Jio is a key monitorable; however, operators could re-work the pricing strategy in the interim.
Our TakeWe believe that Data prices could come down as operators look to expand the user base with bundled offerings. However, any reduction in termination rates as part of the review of interconnect charges could have a moderately negative impact on margins of incumbents.
The regulator believes the sector would see more deals like Bharti Airtel-Loop Mobile as smaller operators exit the business amid high spectrum costs. The M&A norms have been re-worked with modest changes to address industry concerns and would be released soon.
Among other issues, spectrum trading guidelines have been approved and would be released by the DoT. Also, review of interconnect regime, broadband development plan and spectrum efficiency are on TRAI’s agenda.
We believe that finalization of spectrum trading rules will be positive for sub-scale operators in select circles.