Merger and acquisition ambiguity may hurt 2G spectrum bids
Ambiguity in merger and acquisition norms threaten to delay the 2G spectrum auction scheduled for February 3, or worse, force telecom companies to place lower bids. The government aims to garner Rs40,000 crore from sale of 2G spectrum.Updated: Feb 01, 2014 01:23 IST
Ambiguity in merger and acquisition (M&A) norms threaten to delay the 2G spectrum auction scheduled for February 3, or worse, force telecom companies to place lower bids. The government aims to garner Rs40,000 crore from sale of 2G spectrum.
Following confusion amongst the prospective bidders for 2G spectrum, the government had asked attorney general GE Vahanvati to examine the M&A norms.
Vahanvati has written to MF Farooqui, secretary, department of telecommunications (DoT), seeking greater clarity on the issue. In his letter, Vahanvati said: "It is clear that a problem would arise in case of a proposed merger of a company which has participated in the auction and which is subject to a lock-in condition."
According to the rules, the sale of spectrum is subject to a lock-in period. If a company that is allotted spectrum is acquired by another company, the spectrum would pass to the buyer. This would violate the terms of the lock-in clause and could lead to legal complications. The M&A norms do not provide any clarity on this issue.
This ambiguity has also cast a shadow on the preliminary negotiations Tata Teleservices is holding with two companies, Vodafone and MTS, for possible sale of its voice and enterprise business.
A source in Tata Teleservices said: "There has to be clarity on M&A first."
Vahanvati has emphasised the point made by the telecom operators and has cautioned DoT, that the auctions could attract low participation. It means, government may get a less-than-expected price from the sale of 2G spectrum in the 900 and 1,800 megahertz bands.
Vodafone and Tata Teleservices spokespersons did not wish to comment either on M&A or the proposed deal involving the latter.
However, MTS CEO Dmitry Shukov said: "Acquisition in telecom are not as easy as buying onions in the market. Proper due diligence has to be done."
First Published: Feb 01, 2014 01:20 IST