From scarcity to plenty through coopeartion to help the consumer. This seems to be philosophy behind the decision of the union cabinet today to approve rules for spectrum trading. This will allow the telecom companies to buy and sell spectrum.

The move is designed to allow telcos to utilize unused airwaves better. It also allows telcos to acquire spectrum outside of the current auction system and helps struggling telcos looking to exit the business to sell the airwaves they have.

The decision comes a month after the Cabinet approved spectrum sharing guidelines that enable telcos to pool their resources for significantly increased efficiency in spectrum usage.

Telcos are facing severe pressure from the government to fix the call drop problem, with the latter saying that there is enough spectrum in the country.

The first impact is expected to be on the ongoing merger talks between Russia’s Sistema-owned Shyam Sistema Teleservices Ltd (that runs the MTS brand) and Anil Ambani Group promoted Reliance Communications Ltd (R-Com). The latter needs the merger for its business continuity purposes.

R-Com will see much of its spectrum expiring in the coming years and has not been able to acquire the necessary airwaves in the last three auctions.

Existing telecom merger and acquisition rules do not allow the merged telco to hold more than 25% of spectrum across the country and 50% in one circle.

According to the approved guidelines, telcos will have to inform the government 45 days before the transaction and will have to pay 1% of the transaction amount as trading fee. Last week, the telcos had made a presentation to the government, asking that the trading fee be kept to a minimum, as otherwise it would amount to double taxation and act as a deterrent.

The telecom commission, the highest telecom policy decision making body in the government, approved the guidelines in June, and submitted it to the Cabinet for approval, almost a year and a half after the Telecom Regulatory Authority of India (Trai) first submitted its recommendations to the Department of Telecommunications (DoT).

Currently, there are around 11 telcos in the country as compared to the five that is considered healthy for any market. This, coupled with the scarce quantum available for the communications services, and fears of radiation from telecom towers in the country, has led to poor service quality, especially in metro areas.