New Delhi: The Government has tightened the mergers and acquisition norms governing telecom service providers.
It has said that the combined market power of the merged entity should not be more than 40 per cent. This is considerably lower than the present definition of dominant.
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. It has also 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. .
While the new guidelines are broadly in line with the recommendations made by the telecom regulator, DoT has not agreed to a proposal to increase the existing cap of 10 per cent on equity that one telecom player can acquire in another operator in the same service area. DoT has retained the clause whereby a single entity cannot own more than 10 per cent stake in two different telecom companies in the same circle.
3-month deadline
DoT has made it mandatory for the merged entity to meet the subscriber linked criteria for spectrum within 3 months of the deal. If the combined spectrum is in excess of the prescribed subscriber-linked criteria, then the operator will have to surrender the excess radio frequency.
The new norms also put a 3-year lock-in period on new operators. Any permission for merger shall be accorded only after the completion of 3 years from the effective date of the licences. However, DoT has not spelt out whether it will allow the new licence holders to sell equity to another company before the 3-year period. This will have a bearing on a number of global players such as AT&T and Sistema who are looking at acquisitions in the Indian telecom space.
Reacting to the policy, T. V. Ramachandran, Director General, Cellular Operators Association said, “At a time when everyone is talking about consolidation in the telecom industry, DoT has tightened the norms. This will discourage consolidation which, in the long term, is not good for the sector.”
It has said that the combined market power of the merged entity should not be more than 40 per cent. This is considerably lower than the present definition of dominant.
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. It has also 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. .
While the new guidelines are broadly in line with the recommendations made by the telecom regulator, DoT has not agreed to a proposal to increase the existing cap of 10 per cent on equity that one telecom player can acquire in another operator in the same service area. DoT has retained the clause whereby a single entity cannot own more than 10 per cent stake in two different telecom companies in the same circle.
3-month deadline
DoT has made it mandatory for the merged entity to meet the subscriber linked criteria for spectrum within 3 months of the deal. If the combined spectrum is in excess of the prescribed subscriber-linked criteria, then the operator will have to surrender the excess radio frequency.
The new norms also put a 3-year lock-in period on new operators. Any permission for merger shall be accorded only after the completion of 3 years from the effective date of the licences. However, DoT has not spelt out whether it will allow the new licence holders to sell equity to another company before the 3-year period. This will have a bearing on a number of global players such as AT&T and Sistema who are looking at acquisitions in the Indian telecom space.
Reacting to the policy, T. V. Ramachandran, Director General, Cellular Operators Association said, “At a time when everyone is talking about consolidation in the telecom industry, DoT has tightened the norms. This will discourage consolidation which, in the long term, is not good for the sector.”
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