GSM players oppose Trai move to ease M&A norms

GSM cellular operators have decided to oppose the scrapping of the norm under which a telecom operator cannot pick up more than a 10 per cent stake in a competing operator in the same circle.

The Telecom Regulatory Authority of India (Trai), which has come out with a consultation paper on changes in the Unified Access Service Licence (UASL) regime, has suggested the scrapping of the norm.

The issue may leave the telecom industry divided, with Reliance Communications expected to be in favour of reduction or removal of the 10 per cent clause.

An official spokesperson for the company declined comment on the issue. The Tatas have also supported the GSM operators' contention, though a spokesperson for the company declined comment.

Insiders say one proposal seeks the removal of the clause provided there are three players in a circle.

At a meeting of Cellular Operators' Association of India (COAI) members, a view emerged that the 10 per cent limit should continue as it checks market domination and also protects customers against anti-competitive practices.

GSM operators also felt that any equity position which goes beyond 10 per cent should be subject to intra-circle merger rules.

COAI Director General T V Ramachandran said, "The matter is under discussion and needs to be debated on". A top executive of a GSM mobile company said, "We think the 10 per cent limit should stay as it is pro-competition and consumers."

The issue came into the open when the Aditya Birla Group complained that the Tatas had already breached the 10 per cent equity restriction in Idea Cellular in many circles as they also ran CDMA operations through Tata Teleservices, in which they had a large stake.

The Trai wrote to the Department of Telecommunications that the Tatas, through their various companies, were holding substantial equity in TTSL as well as BTA Cellcom in Madhya Pradesh and that the issue of compliance with the 10 per cent rule needs to be addressed on a priority basis. The Tatas eventually sold their equity stake in Idea Cellular to the Birlas.

The issue cropped up again when Reliance made a bid to buy Hutchison's 67 per cent equity stake in Hutch-Essar Ltd. Experts say the company was restrained by the fact that it only had the option of buying 100 per cent stake in the company and merging it with Reliance Communications.

Similarly, Vodafone, which had a 10 per cent stake in Bhart Airtel, had to reduce its equity stake in the company after it took over Hutchison's stake in Hutch-Essar.