Nripendra Misra himself denied that his meeting with Vodafone’s Mathew Kirk and Neil Gough had anything to do with Hutchison Essar.
NEW DELHI: Senior officials of Vodafone, widely seen as frontrunners to buy out Hong Kong tycoon Li Ka-shing’s holdings in Hutchison Essar, last week called on Nripendra Misra, chairman of the Telecom Regulatory Authority of India (Trai), the telecom regulator. They met Misra after meeting department of telecom (DoT) officials.
While the grapevine obviously relates this event to Vodafone’s bid to buy India’s fourth largest mobile operator, Misra himself denied that his meeting with Vodafone’s Mathew Kirk and Neil Gough had anything to do with Hutchison Essar. According to him, the officials were here to seek an extension of the deadline for submitting their views on the resale of international private leased circuits (IPLC), on which Trai had issued a consultation paper last month.
The deadline for soliciting views, originally set for January 5, has been extended to January 15. As a telecom player, Vodafone, no doubt, would have an interest in IPLCs, but observers doubt if you need to send two officials personally just to seek an extension of the deadline for submitting views. It could have been done just as easily over the phone.
On the other hand, if Vodafone is on the verge of buying Hutch, a preliminary meeting with Trai on regulatory hurdles makes sense.
Trai’s recommendations on intra-circle mergers and acquisitions, issued in January, 2004, states that “all telecom mergers are to be notified to Trai” and the “merged entity should obtain the approval of the licensor (DoT)”. The Trai recommendation also says that it has “the right to intervene and/or inquire into expected or completed mergers”.
DoT had accepted most of the recommendations on mergers and acquisitions (M&A), but with some modifications. And the subsequent government notification on the issue has been silent on Trai’s role in any telecom M&A.
According to DoT rules, a merger of licences is permitted subject to the condition that there are at least three operators in a service area. Also, prior approval of DoT will be necessary for an M&A.
DoT rules say that monopoly will not be permitted in any circle - and monopoly is defined as 67% or more in terms of marketshare in any telecom circle. The merged entity shall also be entitled to the total amount of spectrum held by the merging entities, subject to the condition that after the merger the amount of spectrum cannot exceed 15 MHz per operator per service area for metros and category A circles, and 12.4 MHz for B and C circles each.
Significantly, the DoT guidelines state that “while granting permission for merger of licences, the licensor may suitably amend/relax/waive the conditions in the respective licences relating to the clause on holding of `substantial equity’ in another operator.
As per the licence, no single company, either directly or through its associates, should have substantial equity in more than one licensee company in the same service area.
The substantial equity refers to more than 10% equity holding.
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