Inexcusable delay

Bharti Airtel’s decision to call off the deal to acquire Loop Mobile’s subscribers once again highlights the policy paralysis within the Department of Telecommunications (DoT). The agreement between the two operators, under which Airtel was to acquire Loop Mobile’s three million subscribers in Mumbai along with the mobile infrastructure, was announced in February. The arrangement was a win-win situation for all concerned; Loop Mobile’s 20-year licence is set to expire on November 29 and as the company was unable to win back the spectrum, it could not continue offering services to consumers. Airtel, on the other hand, won spectrum in Mumbai in the last round of auction. The slump sale deal with Airtel, therefore, could have ensured continuity of service to Loop customers. But nine months after the deal was announced, the two companies have been forced to call it off because the department is yet to take a decision on whether to allow the transaction or not. This is despite the fact that in September TRAI had asked DoT to decide quickly in the interest of consumers.

The question before the department was this: Can an operator whose licence is expiring be allowed to transfer its subscribers to another without going through Mobile Number Portability? While TRAI had opposed the transfer, there is no specific provision for or prohibition of slump sales — where all components of a business are sold for a lump sum, without assigning separate values to various assets — under the telecom licence rules or tax laws. DoT should have either taken a clear stand on the issue or allowed Loop’s subscribers to decide whether they wanted to shift to Airtel’s network or some other player. By not taking a decision, DoT has not only created an inexcusable uncertainty over such future transactions but also has left Loop, its lenders and its subscribers in the lurch.

The Loop mess underscores the need for reviewing the rules governing mergers and acquisitions in the telecom sector. A number of licences are set to expire over the next two-three years and it is important for customers of these operators to get a heads up on the options available to them in the event their existing operator is unable to win back spectrum. There are also a number of operators struggling to stay afloat but are unable to sell out due to lack of clarity in the mergers and acquisitions policy. After 2008, there has been no M&A deal in the telecom sector. This situation is not only bad for telecom companies but also for the industry as a whole, and perhaps the country as well. After all, if those wanting out had been allowed to exit, spectrum as well as infrastructure resources currently with these players could have been better utilised by others, and consumers would have benefited. It is time the Centre formulates a clear exit policy for telecom companies that do not want to remain in business.