Predatory takeovers by incumbent telecom giants has been curtailed and grounds set for smaller firms to join hands to take on leaders under new guidelines for mergers and acquisitions (M&A) recommended by the industry regulator.
The Telecom Regulatory Authority of India (TRAI) said mergers and acquisitions should be allowed only if the two entities in question have a combine market share of less than 60%.
The guidelines are subject to approval by the department of telecommunications (DoT) and so will mergers and acquisitions.
There are now about a dozen operators in each telecom zone and some are planning to exit for which sell-outs are a new way.
“For determination of market power, market share of both subscriber base and adjusted gross revenue of licencee in the relevant market shall be considered,” TRAI said.
In case the market share of the unified entity is less than 35%, then DoT alone can clear an M&A deal. If it is more, the TRAI will need to approve it.
“Consequent upon the merger of licences in a service area, the total spectrum held by the resultant entity shall not exceed 25% of the spectrum assigned, by way of auction or otherwise, in the concerned service area in case of 900 and 1800 MHz bands. In respect of 800 MHz band, the ceiling will be 10 MHz,” said TRAI.
The companies will have to pay to the government a spectrum transfer charge of 5% of the difference between the transaction price between the parties and the total current price.
‘Pay market rate for excess spectrum’
The telecom regulator has made it clear that incumbent telecom operators will have to pay for spectrum beyond what has been allotted to them at market rates. TRAI clarified this in response to DoT’s views on spectrum management. Incumbents such as Bharti Airtel, Vodafone and Idea Cellular hold spectrum beyond the contracted 6.2 MHz.