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Economy

India Telecom Commission eases spectrum limit rules for mobile phone operators

Reliance Jio, Vodafone India likely to benefit from higher caps

A sales person displays JioPhone at a store of Reliance Industries' Jio telecoms unit, on the outskirts of Ahmedabad, India.   © Reuters

MUMBAI (NewsRise) -- India's highest telecom decision-making body approved a recommendation to raise the limit of spectrum mobile phone companies can hold in a move that would likely hasten the pace of consolidation in the market.

The Telecom Commission recommended increasing the spectrum limit in one service area to 35% from 25%, while the limit in the sub-one gigahertz spectrum band has been expanded to 50% from 35%, a top government official, who declined to be identified, said Tuesday evening. The changes need approval from India's federal cabinet.

The Telecom Regulatory Authority of India had recommended relaxing these norms in November. Analysts said the rule changes will pave the way for the completion of the merger between Vodafone India and Idea Cellular, and may also prompt billionaire Mukesh Ambani's Reliance Jio Infocomm to buy more spectrum from his younger brother Anil's troubled Reliance Communications.

"This could potentially benefit the top incumbents and Jio to acquire more spectrum, as well as reduce hurdles in potential mergers and acquisitions opportunities," Morgan Stanley said in a report.

India's telecom market has seen a wave of consolidation in recent months amid a bleeding price war triggered by the entry of Reliance Jio. Ever since it entered the market in September 2016, Jio has pursued a strategy of slashing prices to attract subscribers. Its offerings of free voice calls and data plans, which continued for months, eroded revenue and profits of rivals such as Vodafone and Idea Cellular.

In March, Vodafone and Idea agreed to merge their operations in a $23 billion deal that will allow the combined company to leapfrog market leader Bharti Airtel. The companies, which are awaiting the final regulatory approval to complete the merger, would have had to return or sell the excess spectrum under the previous norms.

Reliance Communications agreed to sell its wireless operations to Reliance Jio last month as the company needed funds to repay billions of dollars of debt. According an Economic Times report, Jio may target Reliance Communications' remaining unsold airwaves in the 850 megahertz band, considered one of the best for high-speed internet services, following the ease of spectrum-holding rules.

Bharti Airtel has also been buying assets to beef up its market share in the second-largest telecom market in the world. In 2016, the company spent more than $1 billion buying up the local operations of Norway's Telenor and India's Videocon. Last year, it agreed to take over the consumer business of smaller rival Tata Teleservices on a debt-free, cash-free basis.

Shares of Bharti Airtel closed 0.7% lower on Wednesday, while Idea Cellular lost 1%. The benchmark S&P BSE Sensex ended little changed.

--Dhanya Ann Thoppil

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