09/09/2015 4:00 PM IST | Updated 15/07/2016 8:25 AM IST

Government Allows Telecom Companies To Trade Spectrum

Bloomberg via Getty Images
A man uses a Samsung Electronics Co. smartphone in Mumbai, India, on Saturday, Feb. 28, 2015. The government auction of telecom wireless spectrum starting March 4 is expected to raise as much as $15.6 billion from service providers including those controlled by billionaires Kumar Mangalam Birla, Sunil Mittal and Anil Ambani, according to ICRA Ltd. Photographer: Dhiraj Singh/Bloomberg via Getty Images

Acceding to a long-standing request from telecom companies, the Union Cabinet has allowed mobile operators to buy and sell airwaves from one another, a move that is likely to ease the recent spurt in call drops.

There's been a dramatic rise in 'call drops,' or phone conversations that are unexpectdely cut. "Call drops" have doubled in the last one year, according to the Telecom Regulatory Authority of India (TRAI), and that's four times higher than the permissible limit. Telecom companies have blamed both the limited number of cellphone towers per instrument in India as well the limited spectrum that telecom companies claim they possess. The Cabinet's decision could potentially solve the latter.

Additionally, as the Business Standard reports, this could give an exit route to smaller players and the option of trading in particular circles.

Telecom stocks soared on the Cabinet approval - Reliance Communication soared over 15 per cent, while Bharti Airtel and Idea shot up over 5 per cent. They overwhelmingly contributed to the Sensex regaining nearly 400 points after more than a week of precipitous decline.

Analysts told the Economic Times that the spectrum trading approval will pave the way for 850 mhz spectrum to be sold to Reliance IndustriesBSE 2.84 % telecom unit, Reliance Jio.

"For this (spectrum trading) they (telecom companies) don't have to take permission only intimation before 45 days and an undertaking that we are complying with all the rules," Telecom Minister Ravi Shankar Prasad said.

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