The Hindu Business Line : Tough norms on telecom merger laws proposed

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Tough norms on telecom merger laws proposed

TRAI fixes combined market power of merged entity at 40%

Tightening norms
Minimum of 4 operators must be left per circle post merger
Increase in existing cap of 10 per cent on equity proposed
Additional spectrum only for those completing roll-out commitments

Our Bureau

New Delhi, Aug. 29 The Telecom Regulatory Authority of India (TRAI) has recommended tightening in the existing mergers and acquisition laws governing telecom service providers.

It has said that a minimum of four operators should be left per circle post any merger. At present, a minimum of only three operators per circle is required.

It has also said that the combined market power of the merged entity should not be more than 40 per cent. This is considerably lower that the present definition of dominant market share which is pegged at 67 per cent. If this proposal is accepted, then any two large operators such as Bharti Airtel and Vodafone Essar may not be able to merge as both have more than 20 per cent market share each in some of the circles such as Delhi. However, TRAI has allowed the merged entity to keep the spectrum which they jointly have. At present there is a cap of 15 Mhz.

The regulator has also suggested an increase in the existing cap of 10 per cent on equity that one telecom player can acquire in another player in the same service area. While the existing ceiling of 10 per cent can be acquired through the automatic route, acquisition of anything beyond that and up to 20 per cent equity would have to get approval on a case by case basis, subject to conforming to the M&A guidelines recommended by the regulator.

Relaxes measures

In order to make the operators more responsible to their roll-out obligation, TRAI has said that additional spectrum will only be given to those who complete their roll-out commitments.

It has, however, relaxed the punitive measures for failing to complete the roll-out obligations by suggesting that the Government cannot cancel the operator’s licence. The regulator has also acknowledged the delays caused due to Government approvals and has therefore set a timeframe for the various agencies involved to enable the operator to fulfil its roll-out obligations.

Mixed tech use

TRAI has also permitted mixed use of technology subject to availability of spectrum. This will benefit Reliance Communications which has applied for GSM spectrum. It has, however, put a rider that such operators will have to pay all fees and charges that is paid by the existing GSM operator. Reliance will therefore have to cough up another Rs 1,500 crore for a pan-India GSM licence.