M&A policy: Telecom Commission to review norms on Tuesday

Govt expected to finalise the policy before next round of auction

The Telecom Commission, the highest decision making authority in the Department of Telecommunications (DoT), will review the final draft of the merger and acquisition (M&A) guidelines at its next meeting on Tuesday.

The commission will also examine the clarifications by the Telecom Regulatory Authority of India’s (Trai) on its earlier recommendations on spectrum pricing. The commission will then forward these, along with its comments, to the Empowered Group of Ministers (EGoM) headed by Finance Minister P Chidambaram.

The government is expected to finalise the M&A policy before the next round of auction scheduled for January 8.

The commission will also consider whether to bring infrastructure providers, including telecom tower companies, under the purview of the new unified licensing regime. Infrastructure providers include companies that establish and maintain passive infrastructure assets such as dark fibre, right of way, duct fibre and tower, and offer these infrastructure to telecom operators.

Earlier, the government could not include such companies under the unified licensing regime because the limit of foreign direct investment (FDI) for telecom operators was capped at 74 per cent. Now, the 100 per cent FDI has been permitted in the sector.

Meanwhile, a DoT committee has noted the government should revisit the definition of adjusted gross revenue for infrastructure providers. The DoT committee had earlier suggested that infrastructure providers should be levied an annual fee of eight per cent on the revenue and bring these entities under the ambit of unified licensing regime. According to the committee, it would fetch the government an additional revenue of Rs 2,000 crore a year. However, it cautioned the move could have a major impact on the end-consumer and annual fee on these firms may not be legally tenable.

For 2010-11, the government had pegged the cumulative revenue of major companies in the sector at Rs 23,580 crore. The industry is growing at about 11.4 per cent per annum.

At present, these firms do not pay any licence fee and can start operations with a registration certificate, which has a processing fee of just Rs 5,000. There are about 375,000 telecom towers in India.

Bringing infrastructure providers under the licence regime could benefit consumers as well, because it would lead to better services. Increased infrastructure-sharing will also reduce overall costs of telecom services, the DoT committee noted.

In the final draft M&A guidelines, DoT proposes to increase the market share ceiling of the merged entity at 50 per cent from the 35 per cent it had proposed earlier. This clause is likely to benefit the existing operators.

The DoT has also given an in-principle approval to allow trading of spectrum. However, it retained the clause which would make the firms pay for spectrum beyond a prescribed limit if it was acquired after paying the entry fee and not through auction.