New Delhi, June 12: The telecom watchdog has set the stage for convergence and consolidation in the industry: it has tossed the idea of allowing a telecom service provider to offer both CDMA and GSM technologies under the same licence though it could place restrictions on the number of players who can operate within a telecom circle.

The move — which has been initiated with a new consultation paper — has far-reaching implications for an industry that is growing at close to 30 per cent a year in terms of revenues.

Back in October 2003, the Telecom Regulatory Authority of India (Trai) floated a blueprint for a universal access service licence (UASL) that first sought to bring GSM operators and basic telephony operators using CDMA technology on a par. It didn’t happen until May 2004 — but the alphabet soup left the industry deeply riven.

Trai is now seeking industry’s views on a range of issues including an overarching licence for the two technologies which, on the face of it, will benefit Reliance Communications that straddles both spaces.

The consultation paper, which will determine the future direction of telecom operations in India, has also sought comments on the framing of new rules for mergers and acquisitions in the sector, scrapping mandatory rollout obligations, allowing operators to use multiple technologies and determining the number of operators who can offer services in a telecom circle.

Trai has asked telecom players’ views on changes proposed in the merger and acquisition (M&A) guidelines. The telecom regulator wants to know whether a company should be allowed to acquire more than 10 per cent in a rival telecom company in the same circle, and whether there ought to be a cap on the spectrum limit for a merged entity.

Under the present M&A guidelines, which came into effect in 2004, a company operating in a circle can acquire only up to 10 per cent in a rival telecom company in the same circle. This is one of the reasons why Hutchison Essar could not formally merge with BPL Mobile Communications in Mumbai. The restriction also forced Vodafone, which acquired a 67 per cent stake in Hutchison Essar in February, to agree to sell its 10 per cent stake in Bharti Airtel. It also prompted the Tata group to sell its stake in Idea Cellular to the Birlas. Moreover, in case of a merger, the combined entity can hold only 15 Mhz of spectrum and will have to surrender the rest.

“Capping the number of operators offering services in a telecom circle would ensure that scarce resources like spectrum can be made available in adequate quantity to the present licensees, enabling them to expand their services and maintain their quality of service,” a senior department of telecom (DoT) officer told The Telegraph.

At present, any Indian company fulfilling the eligibility criteria can apply for the licence. In most cases, there are five to eight operators in each designated geographical area, also called a telecom circle.

Trai is also seeking views on permitting service providers to offer access services using combination of technology — GSM and CDMA — under the same licence. Reliance Communications, the nationwide CDMA operator, offers GSM services in eight circles but under two different licences, said the company spokesperson. He added the new move was welcome.

However, the second CDMA player — Tata Teleservices — is not open to the idea. A company spokesperson said, “Technology neutrality cannot be interpreted to mean a combination of both technologies. An operator must choose one technology and grow with it. If it wants to migrate to an alternative technology, it must forego spectrum in the first.”

The cellular operators have also been sore over unrealistic roll-out obligations – basically extending their service to the rural areas.

The removal of roll-out norms has been a long pending industry demand. Bharti chairman Sunil Mittal said, “There is no need for norms. We know that the more we roll out, the better it is for us.”