India allowed mobile-phone operators including Vodafone Group Plc to trade wireless airwaves with rivals as part of new rules that may prompt consolidation in the sector. Shares of carriers rose.
Trading airwaves will be permitted if they have been acquired through an auction since 2010 or the operator paid the market value to acquire them initially, according to a government statement in New Delhi Wednesday. Operators can only sell spectrum after two years of ownership and will need to clear all dues before any transactions.
“This is a positive for the whole sector from the consolidation viewpoint,” said Naveen Kulkarni, a Mumbai-based analyst at PhillipCapital (India) Pvt. by phone. “It will provide the much needed trigger. The license agreements, however, may need to be amended to include these changes and that might take a few months.”
Shares of mobile phone operator Reliance Communications Ltd. surged 12 percent Wednesday, the most almost five months. Billionaire Sunil Mittal-controlled Bharti Airtel Ltd.’s shares gained 1.8 percent while Idea Cellular Ltd. climbed 2 percent.
The new rules will help the Anil Ambani-controlled Reliance Communications to strike a nationwide pact for its 850 megahertz band with brother Mukesh Ambani’s Reliance Jio, according to Bloomberg TV-India. Jio is likely to roll out its $16 billion fourth generation cellular service by the end of this year.
Reliance Jio, Sistema
The new regulations may also boost Reliance Communications’s talks to buy AFK Sistema’s Indian wireless unit in a all-stock deal.
In addition to prompting consolidation, the decision may improve call quality as carriers gain access to more spectrum in India’s overcrowded wireless market with more than
900 million subscribers. As many as 12 companies operate in 22 circles, or areas, with many having a minimum of seven providers.
Spectrum sharing rules were approved on Aug. 12, allowing pacts between operators having license in the same band.
The new regulations also require payment of a 1 percent, non-refundable fee to the government by the buyer. The license tenure will stay unchanged. This will lead to “harmonious spread” of wireless services across the country, government spokesman Frank Noronha wrote on Twitter after the new rules were approved.