DoT for major changes in licence regulations

Recommendations may encourage consolidation.

The Department of Telecommunications (DoT) is seeking sweeping changes in the Unified Access Service Licence (UASL) norms that include a review of the equity limit under which a telecom operator cannot pick up more than a 10 per cent stake in a competing company in the same circle.

The department, apart from considering a proposal to limit the number of operators per circle, might also allow telecom companies to offer services using a combination of technologies (both CDMA and GSM) under the same licence.

DoT has also decided to review the guidelines on mergers and acquisitions and the roll-out obligations imposed under UASL, apart from pushing through a proposal making it mandatory for telcos to publish telephone directories.

The ministry has approached the Telecom Regulatory Authority of India (TRAI) for a review of these norms.

The recommendations are expected to encourage consolidation in the telecom industry and help telecom companies that have been looking at ways to expand their operations through acquisitions or by offering both GSM and CDMA services under the same licence.

A key beneficiary could be CDMA player Reliance Communications. Last year, the Anil Ambani-controlled service provider applied for spectrum across various circles to offer GSM services, but its application is pending with the government.

The Dhirubhai Anil Ambani Group had publicly announced that it wants to make larger investments in the GSM space, where it has operations in limited areas.

The 10 per cent equity limit was also a key reason for the company pulling out of the race to buy Hutchison's stake in Hutch-Essar, which has since been acquired by Vodafone.

The 10 per cent rule has been seen by many telecom operators as a major hindrance to industry consolidation. For instance, the Tata group (which owns CDMA company Tata Teleservices) had to sell its equity stake to the Birlas in Idea Cellular after the Birlas raised objections on violation of guidelines.

Similarly, Vodafone was forced to reduce its 10 per cent equity stake in Bharti Airtel before it acquired Hutchison's 67 per cent stake in Hutch-Essar.

DoT's line

Review equity limit norm under which a telecom operator cannot pick up more than 10% in a competing company in the same circle

Allow telcos to offer a combination of technologies (GSM and CDMA) under the same licence

Limit number of operators in each circle

Review M&A guidelines

Review roll-out obligations under the licence

Push telecom operators to publish directories