An improved hybrid spectral polarization and amplitude coding (hybrid SPC/SAC) scheme is presented with specified orthogonal ternary sequence. In the previous spectral polarization (SPC) scheme, the entire wavelength is assigned as vertical or horizontal state of polarization (SOP), respectively. In current study, we assign positive (+), negative (-), and nothing chip (0) value on individual wavelengths allocation to realize the specified orthogonal ternary sequence which transformed from original bipolar Walsh-Hadamard matrix. The motivation of this manner is to reduce the phase induced intensity noise (PIIN) resulting from the wavelengths collision on photo-detector. It is shown that wavelength collision can be decreased and PIIN noise is also reduced at photo-detector. Neglecting the effects of shot noise and thermal noise, and considering only phase-induced intensity-noise with a degree of polarization setting of P = 0 for the ideal case, the bit error rate versus the number of simultaneous active users is approximately improved by 40% and 100% compared to the previous spectral polarization coding and complementary spectral amplitude coding (SAC) for a 10-9 error probability, respectively.