India Spinning in Circles on Mobile Licenses
The recommendation comes in response to a letter from the DoT requesting TRAI's views on such a cap. The DoT appears to be in favor of the cap option, as it cites a Telecom Disputes Settlement and Appellate Tribunal ruling suggesting that the DoT should look again at imposing such a condition.
But TRAI has asked the government not to issue licenses while it considers, not only the capping question, but how it might affect the other issues surrounding license and spectrum allocation, such as replacing the subscriber target allocation of additional 2G spectrum with auctions. (See India Auction Fever.)
This is the latest chapter in a licensing saga that began in August 2007, when the DoT accepted TRAI's recommendations that there should be no limit on the number of licenses issued in each of India's telecommunications circles. As a result, the DoT was deluged with a total of 575 license applications submitted by 46 different companies. More would have been forthcoming had the DoT not stopped accepting applications a month later, a decision that has left it locked in a series of court battles. These legal scuffles center around the legality of the DoT's decision to retroactively move the deadline forward from Oct. 1 to Sept. 1, 2007, which has left the 343 applications received between these two dates in limbo.
There are currently 12 to 14 operators in each circle, while the number pending ranges from 13 to 19 per circle. This puts a huge pressure on scarce spectrum and also raises questions about how all would be able to create sustainable businesses.
Most countries license between four and seven mobile operators, and many of the region's smaller operators are struggling to make an impact even under those conditions. (See Asia Minnows Face Cash Crunch and Desperately Seeking Investors.)
With over 10 million new connections added every month, India is an extraordinary market, but there are few precedents for such a large number of service providers. Today, the country's top four operators -- Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Reliance Communications Ltd. , Vodafone India , and Bharat Sanchar Nigam Ltd. (BSNL) -- account for around 70 percent of all connections, establishing a strong power base.
3G auction impact
While not directly linked to the 3G auctions, a possible cap would have an impact on the auctions. India separates licensing and spectrum allocation into two stages, and, according to the existing conditions, all bidders in the 3G auctions must already have a license or be able to commit to doing so.
That means it will be difficult if not impossible for new players to enter the market until the DoT begins to issue licenses again. This raises further questions about the future of those on the pending list, which notably includes AT&T Global Network Services 's Indian subsidiary. However, given the government's desire to get the strongest possible auction participation, it is more likely that the 3G auctions will have to wait for a while longer until the licensing issues are settled. (See $7B Target for India's 3G Auctions.)
TRAI was unable to confirm when it would complete its investigations, but the Authority took four months to deliver its recommendations in 2007.
— Catherine Haslam, Asia Editor, Light Reading