SME Times News Bureau | 16 Feb, 2012
Mergers and acquisitions in India's telecom sector will now be easier as the government Wednesday announced new norms for the industry which it said would lead to a more efficient use of spectrum and help customers get better services at an affordable price.

"Merger up to 35 percent market share of the resultant entity will be allowed through a simple, quick procedure," Communications Minister Kapil Sibal said, unveiling the changes in policies governing licences, spectrum and merger norms for the sector that is set to enter a consolidation phase after the Supreme Court ordered cancellation of 122 2G licences issued in 2008 without auction.

A new national telecom policy will be announced in April, Sibal added.

Telecom service providers welcomed the move saying it will help the sector but added that the government should also consider allowing spectrum sharing in all the bands.

Sibal said that henceforth all players will need to stick to the prescribed limit on spectrum and that mergers beyond 35 percent would be allowed only in cases where it did not violate this limit and other conditions which will be detailed later.

Post-merger, if the spectrum held by the combined entity was beyond the prescribed limit, the excess spectrum must be surrendered within one year of the merger being permitted.

Market share, based on both number of subscribers with the players and revenue, shall be considered while granting permission for the merger.

The Supreme Court has ordered cancellation of 122 licences issued in 2008 in four months and asked the regulator to propose rules for grant of airwaves through an auction. The ruling has affected a few foreign players such as Oslo-based Telenor - the parent firm of Uninor, Sistema who in a joint venture with Shyam Group has its India operations under the MTS brand and Abu Dhabi-based Etisalat which has 45 percent stake in Indian telecom firm Etisalat DB.

Many of the affected players have hinted at exiting from their India businesses which would call for a major consolidation in the industry.

The minister also said that all the future licences will be unified licences and allocation of spectrum will be de-linked from the licence.

"Spectrum if required will have to be obtained separately," Sibal said, adding that 2G spectrum sharing will be permitted but in the same licence service area and the licences will be renewed after 10 years.

Also licence fee will not be uniform across all telecom licences and service areas and will be made equal to 8 percent of the adjusted gross revenue (AGR) in two yearly steps starting from 2012-13.

Service providers will also be allowed to share 2G spectrum. But the minister ruled out any possibility of allowing the same for 3G spectrum sharing.

The ministry has accepted the need of re-farming of spectrum in principle, but further steps will be taken after receipt of the sector regulator.

Sibal said: "The prescribed limit on spectrum assigned to a service provider will be 2X8MHz for GSM and 2X5MHz for CDMA technologies respectively for all service areas other than in Delhi and Mumbai where it will be 2X10MHz and 2X6.25 MHz."

"However, the licensee can acquire additional spectrum beyond prescribed limits, in the open market, should there be an auction of spectrum subject to the limits prescribed for merger of licences," he added.

Decisions on all matters relating to one time spectrum charge, including pricing of spectrum in cases of mergers and acquisitions and spectrum sharing, will be taken separately, said Sibal.

About the impact of these decisions on the customers, Sibal said customers should get better services with more efficient use of spectrum and that too at an affordable price.

Bharti Airtel in its reaction said: "Allowing sharing of spectrum is also a step in the right direction. The government should also consider allowing spectrum sharing in all the bands."

"However, the higher spectrum usage charge, which is applied on the total spectrum held by both the operators, will act as a deterrent to sharing. We hope the government will review this."