New Exit Policy for Teleco’s

A relief for the telecos in India, The Department of Technology ( DoT )  will soon form an exit policy for the telecocmpanies in India. The telecompanies in India are combating  a dual threat of market viability and license cancellation after the recent scams that have rocked the nation. Back in the year 2009 the telecompanies in India were allowed to migrate from limited mobility to full mobility.

This new exit policy by DoT will be as crucial as the one which was formed in the year 2003. The exit policy would deal with all the loopholes and even labor laws if applicable. The new exit policy will allow the firms to sell out or even  surrender their licenses but it is anticipated that there will be heated discussions and lobbying before the policy is finalized. The process is likely to be watched with interest, considering its wide-ranging implications on the competitive landscape, M&As, investments, bank loans, and overall development of telecom across India.

New entrants are expected to be the ones to make optimum use of this policy and at least one telecom operator has expressed its desire to surrender its license. Loop telecom had already informed the Supreme Court that it wants to surrender its license. What this means is that if the policy gets the green signal then the DoT will get lot of 2g Spectrum with itself. Which can be sold to an existing teleco or to a new Entrant. More spectrum with an existing teleco will mean that there will less network congestion and better voice clarity. Existing Telecom giants like Vodafone, Airtel, Idea, Docomo and Reliance will be the ones who will be the gainers. If spectrum becomes available in abundance, the demand-supply equation will push down their spectrum costs even if allocated through a transparent auction process.

The allocation of 121 new licences by ex-telecom minister A Raja in 2008 accounts for a cumulative 532.4 MHz of spectrum. For every operator that exits a pan-India licence, the government stands to receive roughly 96.8 MHz of spectrum.  The telecom sector has been plagued by the impact of the 2G scam since 2008, with distress levels accentuated by multiple probes since October 2010. Licences awarded in 2008 face cancellation threats from four independent sources: a PIL in the Supreme Court, a CBI case in the special CBI Court, a CAG report indicating that 85 companies misrepresented information in application forms to fraudulently access spectrum, and Trai’s recommendation of November 2010 seeking cancellation of 69 licenses due to violation of rollout obligations.