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Pre-merger Approval Must For Telcos: DoT

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The Department of Telecom (DoT) also said no operator would be allowed to transfer fresh spectrum or radio frequency allocated to it for three years from the date of issue.

A communication tower in New Delhi

Announcing the revised norms for intra-circle merger, the DoT said, "Any permission for merger shall be accorded only after completion of three years from the effective date of the licenses." The earlier norms were issued in February 2004.

This lock-in will effectively seal the chances of new and small operators merging with big players in a circle immediately and most importantly the transfer of spectrum.

COAI Director General T. V. Ramachandran said, "I do not see any major aspect in the guidelines that would facilitate consolidation in the sector." The guidelines said: "Prior approval of the Department of Telecommunications shall be necessary for merger of the license." Earlier, companies before merger had to intimate DoT and wait for the approval after undergoing merger.

For regulating acquisitions of equity stake of one access services licensee in the enterprise of another access services licensee in the same license area, present guidelines on 'Substantial Equity' (10 per cent equity or more) shall continue. TRAI had proposed it to be raised to 20 per cent.

"The revised guidelines, it is hoped, will increase competition within the service area and will lead to better utilisation of services," said DoT.

The new rules, which have broadly gone by the regulator's recommendations, also stipulates that the market share of any merged entity in a given circle shall not be greater than 40 per cent either in terms of subscriber base or in terms of Adjusted Gross Revenue. TRAI had proposed a market share limit of 67 per cent.

Other norms make it difficult for companies to get spectrum following merger in a circle. TRAI had proposed the merged entity to keep the spectrum which they jointly have. At present there is a cap of 15 Mhz.

"Consequent upon the merger of licences in a service area, the post merger licensee entity shall be entitled to the total amount of spectrum held by the merging entities, subject to the condition that... (it will meet within 3 months prevailing spectrum allocation criterion)." In case of failure to meet the spectrum allocation criterion in three months, post merger licensee shall surrender the excess spectrum. In addition, after the expiry of the three months, the applicable rate of spectrum charge shall be doubled every 3 months in case of excess spectrum held by post merger licensee, said the licensor.

For determination of market power, market share of both subscriber base and AGR of licensee in the relevant market shall be considered to decide the level of dominance.

The annual license fee and the spectrum charge are paid as a certain specified percentage of the AGR of the licensee. On the merger of the two licenses, the AGR of the two entities will also be merged and the license fee will be therefore levied at the specified rate for that service area on the resultant total AGR.

Similarly, for the purpose of payment of spectrum charge, the spectrum held by the two licensees will be added/merged and annual spectrum charge will be at the prescribed rate applicable on this total spectrum.The government on Tuesday set revised rules for mergers amongst telecoms firms in the fast growing sector, restricting the market share of the joint entity to 40 per cent of the country's subscriber base.

India has 12 firms providing wireless and fixed-line telephone services in some or all of its 23 telecom service areas to over 290 million users and has issued 120 new licences this year.

More than 8 million new mobile phone subscribers are joining up each month, lured by a growing economy, cheap handsets and low call rates. India now has more than 250 million mobile users.
The government's rules are broadly in line with the sector regulator's proposals, presented in August 2007.

The mobile telecoms market in India is dominated by Bharti Airtel which had nearly 62 million mobile users in end-March, Reliance Communications, with 45.8 million users, and Vodafone Essar, which had 44.1 million users.


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