The Hindu Business Line : DoT norms soon on intra-circle mergers

IN what should come as a breather for cellular majors Bharti, Hutch and Idea Cellular, the Department of Telecommunications (DoT) is likely to notify the guidelines for intra-circle mergers and acquisitions soon.

According to official sources, the recommendations of the Telecom Regulatory Authority of India (TRAI) have been accepted and detailed guidelines will be issued, allowing telecom operators to acquire other service providers in the same circle of operation. This is expected to give an impetus to mergers, especially among cellular companies across the country.

At present, although the bigger cellular operators have announced their intention to acquire smaller companies which are providing services in only a couple of circles, they have not been able to consolidate their operations because of a bar on intra-circle mergers.

For instance, Bharti that has a presence in 15 circles across the country cannot acquire an operator in these circles while Hutch cannot buy any operator in 10 circles. The hands of Idea cellular too are tied in the five circles where it operates in addition to the six circles of the Escorts group, which it is in the process of acquiring.

The sources pointed out that operators such as Reliance (which has GSM licence in seven circles), BPL Mobile (in four circles), Spice (2 circles), Aircel (2 circles) and Hexacom (in Rajasthan) are likely to sell out to these bigger players once the intra-circle norms are notified.

For that matter, although Bharti had placed a higher bid than Idea Cellular for buying out the Escorts group's cellular licences, it lost out in the race because of the delay in these norms. The board of Escorts did not want to delay its exit from the cellular industry and decided in favour of Idea Cellular because there was no clash in the circles where they operated.

In line with the TRAI recommendations, as per the guidelines to be notified, even as intra-circle mergers and acquisitions will now be allowed, enough safeguards will be put in place so that monopolies do not emerge.

If consequent to the merger of two companies in the same circles, the number of operators in any circle falls below three, the merger will not be allowed.

Since in a majority of the circles at present there are four operators, only one licence can be sold off.

In circles with three existing operators such as Kolkata, Punjab, Rajasthan and UP (West), as well as those with two operators such as Bihar, Orissa and UP (East), no mergers but only acquisition will be allowed.

The DoT will also notify that the spectrum frequency of the merging entities would be merged subject to the condition that the maximum spectrum that could be held by the new entity will be capped at 15 MHz per operator per service area for metros & Category `A' Circles and 12.4 MHz per operator per service area in Category `B' and Category `C' Circles.

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