Telecom EGoM clears intra-service area merger

The Empowered Group of Ministers (EGoM) on telecom has cleared the intra-service-area merger between two telecom operators, on the condition that both licence holders have paid fees for their respective spectrum holdings. The EGoM took the decision in its meeting on October 18, based on recommendations by the Telecom Regulatory Authority of India, Telecom Commission (TC) and the Department of Telecommunications.

TC had recommended the merged entity be entitled for only one block of 4.4 MHz in GSM or 2.5 MHz in CDMA, and either of the merging companies should pay the difference between the current spectrum price beyond the set limit and the sum already paid before the merger. However, if the companies have obtained spectrum through auction, the relevant auction guidelines would be followed.

The EGoM has clarified that with the introduction of market-based spectrum pricing, companies do not need to pay the spectrum transfer fee of five per cent on the differences between the transaction prices and the market price of spectrum.

According to the EGoM, the new entity would hold 8.8 MHz of spectrum against a single licence for the entry fees already paid.

“Mergers, in accordance with stipulated guidelines, lead to consolidation of spectrum and increased efficiency. Further, both parties to such merger would have paid for their respective spectrum holding in accordance with the decision on pricing of spectrum. Therefore, no additional charge need to be levied in the event of merger of such compliant licences,” the EGoM noted.

In the October 18 meeting, the EGoM also decided to impose a one-time fee on incumbent operators prospectively for spectrum beyond 4.4 Mhz in GSM and 2.5 Mhz in CDMA.

However, the retrospective fee on spectrum beyond 6.2 MHz would be calculated based on the 2001 auction price, indexed to the prime lending rate (PLR) of a state-owned bank.

The retrospective charge will apply from July 2008 to December 2012.

Thanks to the EGoM decision, incumbent telecom operators will now pay Rs 31,000 crore, of which Rs 11,000 crore will come from state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). However, this would be applicable only if the Cabinet gives a go ahead.

The EGoM also deferred its decision a decision on the contentious issue of spectrum refarming in the 900-MHz band.