India To Allow Cellular Firms To Share, Trade Airwaves

India will allow operators in its crowded cellular sector to share and trade airwaves and will also unveil rules to allow carriers to exit the industry, Telecoms Minister Kapil Sibal said as he unveiled a new telecoms policy.

Under the new policy, cellular spectrum will be priced on a market basis and will be separated from the allocation of licences, Sibal said in rolling out a draft policy that follows a licensing scandal that may have cost the government up to $39 billion in lost revenue.

"We will audit spectrum and use of spectrum," he said.

Sibal said generating revenue for the government was not the priority during a media briefing where he announced several initiatives but gave few details.

"In achieving the goals of national telecoms policy 2011, revenue generation will play a secondary role. Our vision is to have broadband on demand," he said.

For carriers, whose share values and margins have been battered by intense price competition that makes calls in India among the cheapest in the world, the policy is a mixed blessing that also requires them to provide free roaming across the vast country.

Allowing carriers to exit the industry could ultimately lead to consolidation.

Shares in two of the biggest listed players, Bharti Airtel and Idea Cellular, were initially lower on Monday before closing higher. Bharti ended nearly 2.5 percent higher, Idea gained 2 per cent, and Reliance Communications ended 1.7 per cent higher.

The broader market closed 2 per cent higher. Sibal's briefing was still in progress when the market closed.

India decided to overhaul its decade-old rules for the industry after alleged rigging in the grant of licences in 2007/08 came to light late last year, forcing the then-telecoms minister to resign. A probe into the case is on and police have charged 14 people so far, including the former minister.

With more than 850 million mobile subscribers, India's mobile market trails only China's. But the 15-player market is in the throes of a vicious price war that broke out in the second half of 2009, squeezing profitability.

While mergers and acquisitions rules are expected to be relaxed to help consolidation in the crowded market, Sibal has said the government will not let the number of players in any telecoms zone fall below six. India allocates mobile phone licences by zone, of which there are 22.