M&A guidelines for telcos likely by August 31

Specifics on spectrum sharing to be finalised by Aug 21

The Department of Telecommunications (DoT) is likely to finalise the much-awaited merger and acquisition (M&A) policy for the telecom companies by August 31. While the draft M&A rules do not have specifics of the spectrum sharing, DoT will finalise the draft instructions on the matter by August 21, according to a recent internal discussion. The final M&A guidelines are likely to have specifics of spectrum sharing.

DoT has noted in the draft M&A guidelines that telecom operators will have to surrender airwaves beyond the government prescribed limit if the merged or resultant entity’s spectrum holding goes beyond the limit.

Companies will get one year time for this, and the merger of licences will be restricted to the same service area. Also, the merged entity will have to migrate to the new Unified Licensing regime.

It also noted that the government will allow merger of up to 35 per cent market share of the resultant entity through a simple, quick procedure. Beyond this, M&A proposals will be considered case-to-case basis. However, the companies should not breach the 25 per cent cap on GSM spectrum or 10MHz for CDMA spectrum holding in any service area.

DoT will consider recommendations from the Telecom Regulatory Authority of India (Trai) if the market share of the merged entity goes up to 60 per cent. However, if the market share crosses 60 per cent, mergers will not be allowed.

The cap for spectrum holding for the merged entity will be 25 per cent of the total spectrum assigned and 50 per cent of the airwaves assigned in a given band. It can be by way of auction in the concerned service area in case of 900MHz and 1,800MHz bands. The ceiling for the 800MHz band will be 10MHz.

This will impose severe restrictions for the GSM operators for possible mergers. The top three GSM operators – Bharti Airtel, Vodafone India and Idea Cellular - together hold about 54 per cent market share, according to Trai data.

The internal discussion also noted that the merged or resultant entity shall be entitled to only one block of 4.4MHz of spectrum in GSM band or 2.5MHz in CDMA band for the entry fee paid. The discussion has referred to a previous decision of the Telecom Commission on this.