Spectrum Trading agreement signed, but when will Reliance Jio get its hands on the spectrum bought from Airtel?

With a definitive agreement signed between Reliance Jio and Bharti Airtel for trading the ‘Right to Use’ spectrum in the 800 MHz band in Andhra Pradesh, Mumbai, and Delhi, the ball is now in the park of Department of Telecommunications (DoT) for regulatory approval of the trading agreement.

If not already done, the next step would be for Bharti Airtel and Reliance Jio to jointly give a prior intimation for trading the right to use the spectrum at least 45 days before the proposed effective date of the trading. Both the licensees need to given an undertaking that they are in compliance with all the terms and conditions of the guidelines for spectrum trading and the license conditions.

Airtel has to clear all the dues prior to concluding any agreement for spectrum trading. Post the effective date of trade, the dues recoverable will be the liability of Reliance Jio (buyer). The spectrum acquired by trading can be deployed for any technology by combining it with their exisiting spectrum holding in the same band.

Reliance Jio also needs to be in compliance with the prescribed spectrum caps declared from time to time. The spectrum acquired through trading will be counted towards the spectrum cap by adding to the spectrum holding of the buyer.

For the unversed, TSPs are allowed to sell their spectrum through trading only after two years from the date of its acquisition through auction. In this case, the spectrum being acquired through trading from Airtel became part of Airtel’s spectrum kitty through TTSL-Airtel merger. The lock-in period for spectrum trading is already over allowing immediate trading of spectrum between Reliance Jio and Bharti Airtel post regulatory approval.

Spectrum Trading is currently only permitted on a pan-LSA basis by DoT with buyers acquiring entire spectrum holding of the seller in a spectrum band mandated to fulfill the associated roll-out obligations within the balance time period for compliance subject to a minimum period of two years.

In case a buyer acquires a part of the spectrum holding of the seller in a spectrum band then both are responsible for the roll-out obligations. Bharti Airtel will have to clear it’s Spectrum Usage Charges (SUC) and it’s installment of payment due till the effective date of trade.

A non-refundable transfer fee of one percent of the transaction amount of aforesaid trade or 1% of the prescribed market price, whichever is the higher shall be imposed on all spectrum trade transactions to cover the administrative charges incurred by Government in servicing the trade. The same shall be paid by Reliance Jio to the Government being the buyer.

Notably, the Spectrum Trading Guidelines remain in suspension from the date of the issue of the NIA to the date of publishing of provisional results of the auction. Depending on when the agreement was signed followed by the intimation to DoT by both parties would determine the timeline by when Reliance Jio gets its hands on the traded spectrum.

If all things are in place, Reliance Jio will have the right to use the spectrum traded within 45 days of the joint application. Any discrepancy from either side triggering a response from DoT to the joint application would delay the trading with the seller’s clearing of OTSC and SUC charges a major requisite.