TRAI Regulate M&A in telecom industry

Operators with 35% combined market or revenue share can merge, case-wise approval possible if joint share up to 60%; new ground rules on spectrum. 

Mergers of telecom operators with a combined market share or adjusted gross revenue of less than 35 per cent in a circle should be permitted, according to new recommendations by sector regulator Trai. If the combined market share is 35-60 per cent, the government could consider allowing a merger on a case-by-case basis. 

In no circumstances should mergers be allowed if the combined market share would exceed 60 per cent, according to Trai (the Telecom Regulatory Authority of India). 

The move is expected to encourage much-needed consolidation in the telecom industry, where there are already more than 10-12 players in each circle. Many such operators in financial difficulties could then get a way out. 

The new recommendations would also significantly liberalise the amount of spectrum the merged entity can retain: up to 25 per cent of the total spectrum available with all the operators in the circle. Earlier, the merged entity could retain only 14.4 MHz and had to return the rest to the government. In the new plan, the merged operator can retain 16-17 MHz, according to Trai officials' calculations of spectrum availability in various circles. 

Trai has also recommended the government explore the freeing of spectrum usage linked to a specified service. Trai officials say, for instance, users of 1,800 MHz, who currently have to use it to provide only 2G services, can also use it for 3G services. However, the process would entail substantial re-pricing of spectrum to ensure a level playing field for operators. The regulator will release a consultation paper to deal with this issue. 

It has reiterated the stand that operators with excess spectrum beyond 6.2 MHz must pay for it based on current prices, determined by a committee. 

The stand has been criticised by existing players such as Bharti Airtel, Vodafone Essar and Idea Cellular, among others, who will have to fork out nearly Rs 17,000 crore to hold spectrum beyond 6.2 MHz if the recommendation is implemented. The COAI has opposed the move. 

Trai has suggested permitting spectrum sharing, but with stiff riders. Sharing would be permitted only between two spectrum holders, so an operator with a UASL licence without spectrum cannot share with a licensee who has spectrum. Sharing would be for five years and could be renewed. The total spectrum shared should not exceed the limit prescribed for mergers. In a clear move to steer clear of the 3G controversy around operators offering services through roaming pacts, Trai has clarified that spectrum obtained through auction can be shared only if the auction conditions provide for it.

Source: http://cablequest.org/news/telecom-news/item/1045-trai-regulate-ma-in-telecom-industry.htmlSource: http://cablequest.org/news/telecom-news/item/1045-trai-regulate-ma-in-telecom-industry.html