DoT panel backs 30% limit on merged entity's market share

A department of telecommunications (DoT) panel has accepted a majority of the recommendations of the Telecom Regulatory Authority of India (Trai) on merger and acquisition (M&A) rules.

The final approval will have to come from the full Telecom Commission, the highest decision-making body in DoT. However, the way seems clear.

“We have accepted in principle Trai’s views on M&As. These will be part of the new telecom policy, which will be ready by August,” a senior DoT official told Business Standard.

Trai had suggested the merged entity shouldn’t have more than 30 per cent market share in any circle in terms of both subscribers and adjusted gross revenue. The present cap is 40 per cent. Also, it should not hold more than 14.4 Mhz spectrum for GSM services and 10 Mhz for CDMA services. Trai has proposed that the additional spectrum be returned.

This comes amid calls for consolidation in the telecom sector. The presence of at least half-a-dozen operators in each circle has led to tough competition for adding subscribers and a decline in revenues of telecom companies.

At present, a combined entity can have up to 40 per cent market share in a circle and retain the entire spectrum (of the two merged entities) provided it fulfils the subscriber criterion within three months. Otherwise, the excess spectrum has to be returned.

There is also a three-year lock-in period. The DoT panel has accepted Trai’s suggestion that this be done away with. Instead, Trai has recommended that a promoter not be allowed to dilute equity below 51 per cent for five years or till the rollout conditions are met.

Another recommendation is charging a one-time fee from operators holding more spectrum than was mentioned in their contracts.

The policy also proposes allowing companies to share spectrum.

The official said Telecom Minister Kapil Sibal had already announced that the M&A policy would mandate a minimum of six operators per circle, including government-owned MTNL/BSNL.

Bharti Chairman Sunil Mittal had earlier said consolidation in the telecom industry was inevitable and he did not see more than six players surviving. Most of his counterparts have also said this.

Trai says the policy will ensure better use of resources, while preventing abuse of market dominance.

Telecom Secretary R Chandrasekhar, in an interview to Business Standard, had said, “Subject to the floor of six operators in a circle, any artificial barrier that may have crept in, which prevents such consolidation from happening, is being reviewed. But precise details, in terms of how much relaxation and in what manner, will be mentioned in the final policy.”