The telecom sector is a step closer to much-needed consolidation with the Empowered Group of Ministers (EGoM) approving the proposed mergers and acquisitions (M&A) norms late on Tuesday.
The norms propose a maximum of 50% market share for an operator per circle and a three-year lock-in period for companies buying spectrum via auction. Tuesday’s M&A norms will now have to be approved by the Cabinet.
The EGoM also said that a total of 403 MHz of spectrum will be auctioned in the upcoming auction.
Telecom industry stalwarts welcomed the EGoM’s decisions, but said prickly issues like transfer pricing and unified licence need to be addressed soon for clarity.
“Overall, we are pleased with the decision, specially the step to moving the market share cap from 35% to 50%. However, we will wait for additional clarifications on issues like unified licensing, transfer pricing, the whole issue of treaty consolidation and how M&A are treated,” said Rajan Mathews, director-general of the Cellular Operators’ Association of India (COAI). “But this move is surely set to start the conversation about M&A across the industry.”
The EGoM has proposed to allow the telecom operators to make acquisitions not exceeding the resultant entity’s market share beyond 50%. The buyer would also have to pay an adjusted price of the spectrum according to the market price, if the company acquired had not acquired it through auction.
The long-pending M&A guidelines were approved by the Telecom Commission last month.
While the industry at large sounded pleased, individual telecom companies or telcos, however, appeared a little worried. Speaking on conditions of anonymity, a senior executive at a leading telecom operator said that if there is not going to be any free spectrum, it is unlikely that the firm would go for acquisitions.
According to telecom expert Hemant Joshi, partner, Deloitte Haskins & Sells, the decision to increase the quantum of spectrum in the next auction would be very positive for the industry as lower spectrum might result in aggressive bids and very high prices.
Cabinet to consider spectrum reserve price tomorrow
Current spectrum reserve price stands at Rs 1,764.79 crore for 1800 MHz and Rs 800 crore for 900 MHz
Govt continues to expect Rs 40k crore from spectrum sale
1800 MHz auction to be held in January and 900 MHz auction in March
403.2 MHz spectrum, and not the planned 298.6 Mhz spectrium, to be auctioned in the 1800 Mhz band
Spectrum over 4.4 MHz to be set at market price
Firms buying spectrum via auction to have 3-yr lock-in period