New Delhi : The Cabinet on Wednesday cleared spectrum trading guidelines under which telecom operators will be able to sell radio waves to other service providers, a move that will help address the problem of spectrum shortage.

“The Cabinet has approved spectrum trading. Telecom sector has been demanding it for optimum utilisation of spectrum,” Telecom Minister Ravi Shankar Prasad said here.

As of now only the government is allowed to allocate spectrum to telecom firms through auctions. “The ownership right will be with the Government. We give right of use to operators through auction. That right of use can be traded between two service providers,” Prasad said.

Industry had been waiting for spectrum trading guidelines before they proceed with their consolidation plans. Deloitte Haskins & Sells LLP Partner Hemant Joshi said that spectrum trading would provide bigger players, who have congested networks, a chance to buy new spectrum and improve the quality of service for customers. “Spectrum trading would provide an exit opportunity to operators who have not been able to build scale in India…” Joshi said. The government, however, has not heeded the industry demand of keeping the amount received from trading out of the adjusted gross revenue. As per rules, revenue from trading will form part of component to calculate licence fee and spectrum usage charges levied annually on telecom firms.

For entering into trading agreement, telecom operators will not require prior permission from the government but they will have to inform the authorities 45 days

before entering into such pacts, the minister said. The seller and buyer entering into trading agreement will have to give an undertaking that their pact is in compliance with all rules and regulations. “In a sample check if it is found that the undertaking is wrong then action will be taken, including cancellation of the trading agreement,” Prasad said.

The trading is also expected to indicate market rate of radio waves.

At present it is determined only through auctions conducted by the government. “Spectrum trading has been permitted in all the bands,” Prasad said. He said telecom operators will be able to trade spectrum allocated to them under the old licensing regime after liberalising it by paying market determined price.

“Auction purchased spectrum can straight away go for trading. The buyer will have to pay 1 per cent trading fee (to the government) which will be calculated based on the market rate or the previous auction price, whichever is higher,” Prasad said.

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