Market-share cap for merged entity may be cut to 40% from 67% now
Trai had mooted this in August 2007
NEW DELHI: A new merger and acquisition (M&A) policy for the telecom sector is in the offing, it is learnt.
In the new policy, the market share of the merged entity is expected to be brought down to 40%, from the current 67%.
Although the Telecom Regulatory Authority of India (Trai) had in August 2007 issued its recommendations on licensing and M&A issues, the Department of Telecommunications (DoT) came out only with a licensing policy and none on M&A.
However, now the government is in the process of “revisiting the M&A guidelines,” DoT secretary Siddhartha Behura told DNA Money on Thursday.
Besides market share aspects, the new M&A policy will also stipulate norms on issues related to “buying” spectrum through merger of telcos.
Recently at a telecom meet in Barcelona, Spain, Vodafone chairman Arun Sarin had said that if he was unable to get adequate spectrum from the government for the company’s India operations, he would buy spectrum from the market.
Sarin was referring to acquiring other telecom companies. The new M&A policy is expected to look into situations like these, it is believed.
Even as there has been a talk of a spectrum transfer fee in case of an M&A, DoT is likely to differentiate between a `genuine’ M&A deal and a transaction just for getting additional spectrum.
If an M&A deal is perceived as a “genuine” transaction, there may not be any case for spectrum transfer fee.
However, a formal decision will be taken by the Telecom Commission on this matter soon.
Among other things, the new policy will determine whether there must be a restriction on M&As in the case of 3G (third generation) service for the initial five years or so. The government is yet to come out with the detailed guidelines for 3G.
While framing the new M&A policy, the government will ensure that competition in the market is kept alive and tariffs are lowered, it is learnt.
As for marketshare of the merged entity, the current limit of 67% is being seen as “monopolistic”. And, DoT may follow the TRAI recommendation of lowering the marketshare limit of the merged entity to 40 per cent, to help competition.
With competition in the telecom space intensifying and talks of M&As gaining currency, the government is focused on framing a comprehensive policy for mergers and acquisitions for the sector.
