India May Allow Airwave Sharing, Aid Mergers in Wireless Market

India plans to make more spectrum available to mobile-phone operators, permit sharing and trading of airwaves and aid mergers as it aims to provide handsets to every villager in the world’s second-largest wireless market.

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 today. 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 Airtel Ltd. (BHARTI), the nation’s largest mobile-phone carrier, said last year its plans to offer nationwide high-speed services 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 (VOD) 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 such as Telenor ASA (TEL)’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 Bharti Airtel, India’s largest wireless operator, rose 2.5 percent to 363.55 rupees at the close of trading in Mumbai. Reliance Communications Ltd. (RCOM) gained 1.7 percent to 74.05 rupees and Idea Cellular Ltd. (IDEA) advanced 2 percent to 92.1 rupees.

Web Economy

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,” said Sibal. “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 “roadmap” 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.

December Deadline

India will promote 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 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 grant of wireless permits in 2008.

Corruption Charges

Analysts such as 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. “If we get a real spectrum roadmap 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 last year said the spectrum sale was “arbitrary, unfair and inequitable.”

Former telecommunications minister Andimuthu Raja, who is now on trial on charges he conspired 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.

To contact the reporter on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net.

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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