The department of telecom (DoT) on Friday announced a set of rules for granting telecom licences and allocating spectrum that is likely to impact GSM-technology service providers like Bharti Airtel [Get Quote] and Vodafone Essar, among others.

DoT's new policy accepts the recommendations of the Telecom Regulatory Authority of India (Trai) on enhancing the minimum number of subscribers required by existing operators to qualify for additional spectrum.

However, the final norms in this regard will be decided by DoT after it receives a report from the Telecom Engineering Centre.

This implies that GSM operators will now have to first increase their user base to qualify for additional spectrum, a process that would take a few years and delay expansion plans.

The policy has also delinked the unified access service licence (UASL) from spectrum allocation, which effectively raises the bar on this front.

Several service providers have been waiting since January 2006 and 46 companies had applied for licences on the assumption that they would automatically be granted spectrum if their applications were approved.

Crucially, DoT has also upheld the policy that mobile licences are technology-neutral � implying that any operator can use either GSM or CDMA equipment to run networks.

This move mainly benefits Reliance Communications [Get Quote], which was granted the dual-use right late on Thursday night. The company today paid the mandatory Rs 1,650-odd crore and joined the queue of operators seeking spectrum.

In addition, DoT said that state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd [Get Quote] could also use alternative technology to run mobile services (both operators mainly use GSM). However, unlike the private operators, these two companies will not have to pay the entry (or licence) fee for the switch-over.

The department also said it would issue guidelines on mergers and acquisition later. However, it will not hike the minimum threshold equity level of 10 per cent to the 20 per cent, recommended by Trai.

Wired Up

• Spectrum delinked from licence; all eligible applicants to be granted LoI and asked to pay entry fee. No guarantee they will get mobile spectrum
• Telecom Engineering Centre to finalise enhanced user base criteria
• Excess spectrum to be surrendered, especially where user base is lower than required
• New merger and acquisition norms to be issued later, to be different from Trai view