In order to enable consolidation in the sector, the Telecom Regulatory Authority of India proposed to ease up merger and acquisition norms.
The regulator said that merged entity could own up to 25 per cent of the spectrum in a given circle and it could have a combined market share of up to 60 per cent.
TRAI, in May 2010, had suggested to bring a spectrum cap of 14.4 Mhz on the merged entity. It also had said that the combined market share should not be more than 30 per cent. The regulator has now said that if the combined market share of the merged entity is below 35 per cent then it can go through without any approvals. Mergers will also be allowed if the market share reaches up to 60 per cent but subject to scrutiny by TRAI. This means that an operator such as Bharti Airtel which has market share of just over 20 per cent can acquire any of the new players or even those with 10-15 per cent market share.
Larger spectrum
The merged entity can also own larger quantum of spectrum. For example, in Karnataka over 90 Mhz of 2G spectrum has been allocated and if TRAI proposals are implemented, the merged entity can own 22.5 Mhz of spectrum. In addition, the merged entity can buy spectrum through an auction or any market-based mechanism.
“The Authority noted that fragmentation of spectrum, a valuable but finite resource, was not desirable in the telecom industry where size is increasingly becoming an advantage in the delivery of telecommunication services to the people. It, therefore, felt that consolidation of spectrum was something to be facilitated,” TRAI said.
It has also scrapped its earlier proposal to have at least six operators in each circle post a merger. The regulator said the number of operators in a circle does not have any relevance.
There are nearly 13 operators in each circle at present. As at the end of December 2009, seven major players had a share of 98.65 per cent of the telecom market while six new players had a collective share of only 1.35 per cent. Even as at the end of June 2011, the seven major players continue to enjoy a significant share of 93.82 per cent while the six new players cumulatively have a share of only 6.18 per cent.
“It has been noticed that over the last two years, the telecom industry is undergoing a certain stress. The Authority, therefore, feels that there is scope to liberalise the measures towards consolidation of spectrum,” TRAI said.
GSM players hail proposals
GSM operators welcomed TRAI's recommendations on M&As and uniform licence fee, saying it will help operators rationalise their costs of operations, but expressed displeasure on spectrum pricing.
“Recommendations on M&A, uniform licence fee and rationalisation of spectrum limit would be positive for the telecom industry, which is reeling under high operational costs,” Mr Rajan Mathews, Director General, Cellular Operators Association of India, said.
The recommendations will now be vetted by the Department of Telecom after which a final decision will be taken by the Telecom Commission.