DoT finalises M&A rules for telcos
The telecom sector is set to see major changes in the rules of its game, which will result in some consolidation in the overcrowded sector. Manoj Gairola reports. Pre-nups for the telecom marketindia Updated: Dec 14, 2011 00:41 IST
The telecom sector is set to see major changes in the rules of its game, which will result in some consolidation in the overcrowded sector. Incumbent telecom service providers will have to pay for any spectrum they hold beyond 4.4 MHz (GSM) and 2.5 MHz (CDMA).
Sources said the telecom commission has finalised guidelines and only final touches are required. It will be approved in the next meeting that can happen any time, sources said.Under the new guidelines, the price of 2G spectrum beyond 4.4 MHz will be decided on the basis of an auction. Telecom Regulatory Authority of India (TRAI) will be asked to finalise the methodology for the auction. Earlier, the regulator had calculated the price on the basis of 3G spectrum auction, which was open for all operators.
By this methodology, existing operators would have to pay about R18,000 crore for the additional spectrum that they hold.
“It appears that one wrong having been committed in 2008 is supposed to be corrected by an auction in 2012 which may not fetch the right price because of possible cartelisation between incumbent players,” said BK Syngal, former CMD of Tata Communications (earlier VSNL). “The value of the spectrum in 2001 was at a customer base of three million. Today, the customer base has grown by 300 times. One must also look at an economic way to value the spectrum by various methods rather than being subjected to low price by a possible cartelisation.”
On merger and acquisition (M&A) norms, the telecom commission has come to a consensus that M&As will be approved under automatic route if the combined entity does not have more than 35% market share — both in terms of number of subscribers and revenues.
If the marketshare is above 35%, M&A will be permitted to merge if the parties meet certain parameters.