(Updates with today’s share price in fifth paragraph.)
Oct. 11 (Bloomberg) -- India’s plan to make more spectrum available to mobile-phone operators and allow sharing and trading of airwaves will provide carriers with “much needed” extra capacity, Bharti Airtel Ltd. said.
Airwaves held by some government departments, companies and telecommunication services providers may be freed up, Kapil Sibal, India’s telecommunications minister, said at a news conference in New Delhi yesterday. India will “facilitate consolidation” in the industry while ensuring competition, create a single nationwide permit, separate the sale of spectrum and licenses, and audit use of airwaves, he said.
Bharti, the nation’s largest mobile-phone company, said last year its plans to offer nationwide high-speed services in the world’s second-largest wireless market were thwarted after a “severe spectrum shortage” contributed to driving up prices at an auction for third-generation airwaves. Nine of India’s 15 mobile-phone service providers have 3G spectrum, with Bharti owning permits for 13 of the nation’s 22 telecommunications zones and Vodafone Group Plc holding nine.
“Spectrum sharing is a very critical aspect because none of the operators have third-generation spectrum on a pan-India basis,” said Naveen Kulkarni, an analyst at MF Global Sify Securities Pvt. in Mumbai. Companies including Telenor ASA’s local unit that don’t have 3G permits “can actually frame a long-term strategy if there is a proper framework for sharing.”
Shares of Indian telecommunications companies rose. Bharti rose as much as 4.7 percent to 380.45 rupees, Reliance Communications Ltd. gained 3.4 percent and Idea Cellular Ltd. 4.8 percent. The benchmark index advanced 1.3 percent.
The airwaves will be allocated in a “transparent manner through market-related processes,” Sibal said. The department also will work toward getting the telecommunications industry the status of infrastructure, he said without elaborating.
“The proposal to give infrastructure status to the telecom sector and rationalization of taxes and levies will provide much-needed relief to the sector,” Bharti said in an e-mailed statement yesterday. “This will help in further expansion of networks.”
India aims to provide phones to every villager by 2020 from about 35 per 100 now, Sibal said. The government targets to provide broadband on demand by 2015 and achieve 600 million broadband connections by 2020, he said.
“We want all citizens of India, all businesses in India, both rural and urban, to participate in the Internet and web economy to ensure equitable and inclusive development,” Sibal said. “The objective is to enhance affordability, increase access, delivery of multiple services and reduce costs.”
The government will make unlicensed spectrum available and prepare a “road map” for additional airwaves every five years, Sibal said. India will also formulate an “appropriate exit policy for the licensees,” he said without elaborating.
A company with a license to provide phone services can’t sell a stake for three years, according to existing rules. Each of India’s telecommunications zones needs to have a minimum of three carriers.
India will promote the production of telecommunications equipment with 65 percent value addition locally to meet 80 percent of the industry’s demand by 2020, Sibal said. The government proposes to set up Telecom Finance Corp. to fund projects, he said.
The government will seek feedback and formulate the new rules by Dec. 31, Sibal said.
The wireless market in Asia’s third-biggest economy is forecast by research firm Gartner Inc. to exceed 872 million active users by the end of 2014, compared with 601.7 million at the end of July. The country had 858 million mobile phone accounts at the end of July, according to the phone regulator.
Competition among the 15 mobile phone service providers has pushed call charges to less than one U.S. cent a minute, eroding profitability at the carriers.
The proposal to change rules for the first time in more than a decade comes amid an investigation into the granting of wireless permits in 2008.
Kunal Bajaj, director of New Delhi-based consulting company Analysys Mason India Pvt., said the government needed to provide more details of how its proposals will be implemented.
“A lot of people in the industry, a lot of investors, are actually expecting answers to come out of this policy and they are going to be a little bit disappointed,” Bajaj said by phone from Hanoi yesterday. “If we get a real spectrum road map for the release of spectrum in a reasonable period of time, that could be the most positive thing.”
The government is cracking down on corruption after Prime Minister Manmohan Singh vowed to punish anyone found guilty of violating rules in the sale of phone licenses. The auditor said last year the spectrum sale was “arbitrary, unfair and inequitable.”
Former telecommunications minister Andimuthu Raja, who is accused of conspiring to sell the permits at below-market rates; Kanimozhi, a lawmaker; former bureaucrats; and company officials are in jail awaiting trial in the case. Both Raja and Kanimozhi have denied wrongdoing.
--With assistance from Santosh Kumar in New Delhi Editors: Subramaniam Sharma, Mark Williams
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